For long-term investors looking to outsource portfolio management work to an active fund manager, I reckon these two top-performing investment trusts deserve a closer look.
Finsbury Growth & Income Trust
Finsbury Growth & Income Trust (LSE: FGT) invests in the shares of predominantly UK-listed companies, with the objective of achieving capital and income growth. It aims to generate absolute returns in excess of that of its benchmark, the FTSE All-Share Index. Shares in the trust yield 1.9% and benefit from relatively low costs, with an AIC annual ongoing charges ratio of just 0.74%.
The trust is one of the top-performing UK equity funds, having outperformed its benchmark over the past three years, with an NAV total return of 54.8%, against the benchmark performance of 25.4%.
Portfolio manager Nick Train uses a bottom-up stock-picking approach and looks to invest in a quality companies that appear to be undervalued. Unusually for a fund of its size, its portfolio is relatively concentrated, with a total of just 26 stocks as of 31 July. And this is because the fund aims to keep portfolio turnover as low as possible and focus on long-term holdings, which helps to reduce stamp duty and commissions expenses for investors.
However, its important to be wary of the downside of concentration risk. The Finsbury Growth & Income Trust has a great deal of exposure to the consumer goods sector, with big positions in Unilever (10.3%), Diageo (10.1%) and Burberry Group (6.7%). Along with holdings in foreign-listed groups, such as Dutch brewer Heineken and US snacks giant Mondelez, its total exposure to the sector added up to 48.1% as of 31 July.
Edinburgh Investment Trust
The £1.4bn Edinburgh Investment Trust (LSE: EDIN), formerly run by Neil Woodford until 2014, might be a better pick for income-minded investors. In addition to its aim to produce index-beating absolute returns, the trust seeks to deliver dividend growth that exceeds the UK inflation rate.
The fund is now co-managed by Mark Barnett, who has 24 years of experience in the industry, and James Goldstone, who joined the company in 2016. And although the new team has not run the fund for very long, they have demonstrated considerable skill in picking large-cap dividend-paying stocks.
Over the past three years, the trust has beaten the average UK equity income investment trust by nearly five percentage points, with a cumulative performance of 29.3%. Encouragingly, the investment trust also managed to beat Neil Woodford’s CF Woodford Equity Income fund, which gained 24.7% in the period.
Like the Finsbury Growth & Income Trust, the Edinburgh fund invests primarily in UK-listed companies. Large-cap stocks dominate the Edinburgh Investment Trust, with 55.6% of portfolio value represented by FTSE 100 companies as of 31 July. Top holdings include British American Tobacco (7.9%), BP (4.6%), Legal & General (3.6%), BAE Systems (3.5%) and Imperial Brands (3.5%).
FTSE 250 companies represent another 25.6%, while international equities and small-caps account for a further 8.3% and 6.8%, respectively.
With shares in the investment trust currently trading at a yield of 4%, the Edinburgh Investment Trust seems a great pick for investors looking for income through equities. What’s more, with shares in the trust trading at a modest discount to its net asset value of 8%, investors can effectively purchase its assets for less than the sum of its parts at today’s price.
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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.