The Motley Fool

3 investment trusts thrashing the market

Investment trusts are the unsung heroes of the stock market. Now rebranded as investment companies, they lack the marketing firepower of the major unit trusts and are more complex to understand, but the best of them have thrashed the market. 

The following three big names have been around for decades with a proven track record of success. All three are now numbered among the top five most traded investment trusts, according to Interactive Investor, and once you see how they’ve performed, you’ll understand why.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Scottish Mortgage Trust

And the winner is… Scottish Mortgage Trust (LSE: SMT). This £4.5bn mega trust, launched more than a century ago in 1909 when Edward VII was on the throne, has delivered stunning growth of 176% over the past five years, according to Trustnet.com. That’s three times the return on the iShares FTSE 100 exchange traded fund (ETF), which delivered 49% over the same timescale. Sometimes active management is worth paying for.

Not that Scottish Mortgage Trust is particularly expensive, with no initial fee and an ongoing charges figure (OCF) totalling just 0.51% a year (iShares FTSE 100 charges 0.07%). The trust invests in a global spread of equities, with 46% exposure to the booming US market. Top US holdings include Amazon, Tesla Motors and Facebook. It’s roughly 25% invested in Europe, including a stake in Ferrari, and 18% in China, where it holds Baidu and Alibaba. This top quartile fund trades at a premium of 2.3% to net asset value, but that’s the price you pay for success.

Witan Investment Trust

Scottish Mortgage Trust isn’t the only big beast out there. Witan Investment Trust (LSE: WTAN) was also launched in 1909 and now manages assets totalling nearly £1.6bn. Manager Andrew Bell has forced through a successful turnaround plan, adopting a multi-manager approach with 12 investment managers following six different mandates. The result: a whopping 120% return over five years.

Witan is 41% invested in the UK, with holdings such as the London Stock Exchange, spirits giant Diageo and, ahem, BT Group. It’s 25% invested in the US, 16% in Europe and the rest in international stocks. It’s slightly more expensive than Scottish Mortgage Trust, with a total expense ratio of 0.87% a year, but few will be complaining given recent performance, and it trades at a 4.63% discount. However, its UK focus could make it vulnerable to any Brexit slowdown.

Finsbury Growth & Income Trust

Finsbury Growth & Income Trust (LSE: FGT) is a relative minnow with £968m under management, and a parvenu upstart to boot, launched in 1926. While the first two trusts have a roaming international remit, Finsbury is 100% invested in UK stocks, and that has done it no harm at all, with a total blockbusting return of 116% over the past five years.

The fund is run by alpha manager Nick Train, the man behind the hugely popular CF Lindsell Train UK Equity fund (which is up 113% over five years). He has a proven track record in rising and falling markets. Top holdings include RELX, Diageo, Unilever, London Stock ExchangeBurberry and Schroders. Its OCF is 0.8% a year, the premium is 0.36%, yield is 2.02%. Again, it will take a hit if the UK market dips, but right now Train is on a roll.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to read our presentation.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com, Facebook, Tesla Inc, and Unilever. The Motley Fool UK has recommended Burberry and Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.