Investment trusts have long been the unsung heroes of the fund management world, but lately they have been getting their day in the sun. The following two have thrashed their respective sectors. Could they make you rich?
In America we Trust
The North American Income Trust (LSE: NAIT) is a venerable investment trust with a long history, having launched way back in 1902. Recent performance has been strong, according to Trustnet.com, with a return of 96% over the past five years, against an average of 66% across its benchmark North America sector. However, the last six months have been tougher on the US as the Trump rally loses steam.
Today the trust has published its half yearly report to 31 July, and it reflects this slowdown. The company’s net asset value per share rose just 0.6%, slightly ahead of the Russell 1000 Value index return of 0.5% but behind the S&P 500 index return of 4.5%.
This still looks a tempting US income play to me, especially given a progressive dividend stance from the board. Buoyed by a 15% rise in revenue per ordinary share it declared a second quarterly dividend of 7.5p per share, taking total first-half dividends to 15p. That is a rise of a 7.1% following last year’s 9.1%. Currently, the trust yields 3.1% against 2.4% and 2% on the Russell 1000 Value and S&P 500 respectively.
North American Income Trust invests in a concentrated portfolio of just 45 equities and eight corporate bonds. It has a high strike rate with approximately half of its equity holdings raising their dividends over the past six months, by an average of 8%. Chairman James Ferguson reckons US corporate fundamentals continue to improve steadily and income stocks are due a revival: “Many cash generative companies which pay dividends have been out of favour but this sector is becoming more attractive because the risk of higher interest rates has been discounted.” This £409m fund has the added attraction of trading at a discount of 9.61%.
Another overlooked investment trust that has outpaced its sector, JP Morgan Mid Cap (LSE: JMF), published its final results last Friday, and I feel like calling it to your attention. It invests in medium-sized UK companies listed on the FTSE 250 Index and has returned a stonking 178% over the last five years, more than double the 78% return on its benchmark UK All Companies index.
The fund reported a 30.4% total return on net assets against 21.5% on its benchmark, despite Brexit uncertainty, which hit FTSE 250 companies relatively hard. The trust achieved this by reducing exposure to companies focused on the hard-pressed UK consumer and shifting into more resilient sectors. Management team Georgina Brittain and Katena Patel, both appointed in the last five years, deserve their glory.
Living it large
The fund acknowledges that UK mid-caps have suffered from Brexit fears but says these are over-pessimistic with UK companies well placed to take advantage of new opportunities in faster growing countries outside the eurozone. Mid-caps have thrashed large-caps lately and if you think this will continue, this trust is a good way to join in the fun.
Harvey Jones has no position in any of the 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.