I love a good investment trust. While I also buy individual shares, these diversified vehicles allow me a cheap and easy way to de-risk my portfolio. And at the same time, I can target returns that hammer those of the broader stock market.
Take the following trusts: Allianz Technology Trust (LSE:ATT), HgCapital Trust (LSE:HGT), and JP Morgan American Investment Trust (LSE:JAM). These products have delivered a stunning average annual return of 13.7% over the past decade.
For a modest management fee, investors have tapped into the experience of seasoned fund managers to realise those decent profit. And they’ve got exposure to thousands of different global shares without having to pay a transaction fee for each one.
Here’s why I think these top investment trusts should continue delivering exceptional returns.
Tech titan
Allianz Technology Trust has harnessed the enormous growth potential of US tech shares to brilliant effect. Since 2015, it’s delivered an average annual return of 9.7%.
Fears over Magnificent Seven shares like Nvidia, Amazon, and Microsoft abound due to their elevated valuations. This could prompt a pullback, but I think they’ll continue rising strongly over the long term as our lives become increasingly digitalised.
With 51 different holdings, the Allianz Technology Trust provides multiple ways to capitalise on the tech revolution. So if artificial intelligence (AI), for instance, fails to live up to its early promise, segments like cybersecurity, cloud computing, and robotics could still lift the trust to the stars.
Targeting hard-to-reach places
The HgCapital Trust gives investors access to companies that aren’t listed on stock exchanges. These number 57 in total across the software and services sectors. Since the mid-2010s, it’s provided an average annual return of 16.4%.
The companies it holds enjoy recurring revenues and high margins, and are spread across many industries including tax and accounting, payroll, fintech, insurance, and healthcare. This, along with a wide reach across Europe and North America provides excellent diversification.
I expect HgCapital to continue outperforming, though the cyclical nature of its holdings could leave it vulnerable to temporary economic downturns.
Big US returns
The US stock market has been a formidable cash generator over the long term. Since 2015, it’s driven a 15.1% average annual return for the JP Morgan American Investment Trust, with its laser focus on Wall Street equities.
With a high weighting of technology shares, the trust has considerable long-term growth potential, as that whopping return indicates. Just under 30% is locked up in these high-performing shares.
Other well represented sectors include financial services, telecoms, healthcare, and discretionary consumer goods. In total, it holds shares in more than 250 multinational companies, providing excellent growth and income opportunities alongside diversification for safety.
Investor rotation out of US shares may dent JP Morgan American’s returns. But on balance, I’m expecting it to enjoy another strong decade.
