What investment trusts did investors buy in December?

Shares and bonds ended 2023 on a high note, as data pointed to further falls in inflation and expectations intensified that interest rates might be reduced considerably over the year ahead. Notable beneficiaries included technology stocks as well as market areas sensitive to weak economic conditions. 

In this environment, investment trusts at either end of the growth-income spectrum saw strong demand from investors. Lower interest rate expectations reduce the opportunity cost of holding shares in companies with the bulk of their anticipated profits far out into the future. 

At the same time, blue chip shares with a relatively stable outlook and high dividend yields tend to become increasingly attractive when competing income returns from bonds and cash are expected to decline.  

Scottish Mortgage unsurprisingly stayed in pole position in December, as the tech fervour of November carried over to a second month. Improving market conditions have seen the trust’s discount narrow considerably over the past two months, from about 17% to around 9.5% today¹. Progress in this regard was notably poor during the summer and autumn of last year, but patience appears to be finally paying off.

The trust’s active style remains firmly in evidence. Facebook’s owner Meta Platforms returned to the portfolio last month with a 1% weighting. However, just three of the so-called “Magnificent Seven” technology stocks – NVIDIA, Amazon and Tesla – appear among the trust’s top-10 holdings. Apple and Microsoft remain absent. The Dutch chipmaker ASML is still the largest holding, accounting for 6.5% of the portfolio¹.

JP Morgan Global Growth & Income was in second place. The trust aims to beat the MSCI All Countries World Index over the long term, which it has succeeded in doing since stock markets bottomed in 2020. Reflecting this continued success, it currently trades at a 1.7% premium to its asset value.   

Management currently notes the global uncertainties at hand and says it is focused on higher quality companies with robust balance sheets, proven management teams and a stronger ability to defend margins. A prospective dividend yield of around 3.8% looks attractive in an environment where interest rates and inflation are expected to fall below this level². Please note, this yield is not guaranteed. 

Fidelity Asian Values jumped to third place in December. This trust focuses on pockets of value among Asian companies and benefited last year from holding positions in Taiwanese and Korean technology hardware companies. It currently trades at a 7% discount to net asset value. 

The trust’s manager Nitin Bajaj currently sees particular opportunities among Indian banks and attractively valued Chinese companies engaged in the process of returning capital to shareholders.

Continuing the tech theme, Polar Capital Technology Trust was the fourth most bought trust in December. Often seen as a viable alternative to Scottish Mortgage, this trust participated in last year’s late rally but remains at an attractive discount (about 10%) to its net asset value³.

While the trust features positions in most of the “Magnificent Seven”, it is underweight the technology mega-caps overall by comparison with its global technology benchmark. It makes up the difference by focusing on a band of medium-sized and smaller companies that manager Ben Rogoff considers to have stronger growth prospects.

Fidelity European Trust, October’s most bought trust, was in fifth place last month. This trust continues to invest in large businesses differentiated by virtue of their resilience and pricing power. 

Among its largest holdings currently are companies with strong retail brands, including Nestlé, LVMH and L’Oreal, along with the pharmaceuticals giant Roche and superstar of 2023 – the Wegovy weight loss drug maker Novo Nordisk. The trust currently trades at a discount of about 8%. 

Investment Week’s Investment Company of the Year and the Citywire Best UK All Companies Trust was in sixth. Fidelity Special Values differs from most others on this list because it searches out underappreciated companies primarily listed in the UK. 

Manager Alex Wright said late last year he is cautious on the prospects for companies in the near term after recent rate rises. Businesses with lower debt levels and the resilience to navigate uncertainty are favoured. At the same time, the trust’s gearing is being kept low, partly to make room for future opportunities. 

Next up was Murray International Trust. This long-established trust has been investing for growth and income since 1907 and references the FTSE All-World Index on a total return basis. 

Its unconstrained approach has led to its largest holdings bearing little resemblance to other global trusts featured on this list. Broadcom, BE Semiconductor of the Netherlands and Grupo Aeroportuario of Mexico are the current top three. The trust ended the year trading at a 6.2% discount and with a yield of 4.6%⁴. Please note, this yield is not guaranteed.

City of London Investment Trust is no stranger to this list, but it slipped back to eighth place in December. This is the third trust on this list aiming for a combination of long-term income and capital growth, this time from a portfolio of mostly UK shares. 

One of this trust’s current attractions is its exposure to successful global names trading at internationally low valuations. Another is 57 years of unbroken dividend growth and a yield of 5%. Please note, this yield is not guaranteed. The trust currently trades at par⁵.

Greencoat UK Wind, in ninth place, remained investors’ preferred way of capitalising on the global energy transition during the month. The fifth largest constituent of the FTSE 250 Index as at the end of 2023 is clearly benefiting from its exposure to inflation-linked revenues and high power prices at a time of elevated price pressures. 

Allianz Technology Trust rounded out the top-10. The third tech trust to feature in this list in December makes much of the close proximity of its San Francisco-based investment team to Silicon Valley. 

In relation to its global technology benchmark, the trust benefitted from being underweight Microsoft and Apple and overweight Monolithic Power Systems last month. The trust’s managers anticipate a further increase in market breadth beyond the Magnificent Seven as interest rates start to fall. The trust ended the year at an 11% discount to its net asset value⁶.

For more investing ideas, Fidelity’s first Investment Outlook for 2024 is out now.

Top 10 best-selling investment trusts on Fidelity’s Personal Investing platform in December 2023

1. Scottish Mortgage Investment Trust
2. JPMorgan Global Growth and Income PLC
3. Fidelity Asian Values PLC
4. Polar Capital Technology Trust
5. Fidelity European Trust PLC
6. Fidelity Special Values PLC
7. Murray International Trust
8. City of London Investment Trust
9. Greencoat UK Wind PLC
10. Allianz Technology Trust PLC

Source: Fidelity Brokerage, 1-31 December 2023

Source:

¹ Scottish Mortgage, 16.01.24
² JP Morgan, 31.12.23
³ Polar Capital, 29.12.23
⁴ abrdn, 31.12.23
⁵ Janus Henderson, 16.01.23
⁶ Allianz Global Investors, 31.12.23
 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing, please read the relevant key information document which contains important information about each investment trust. The shares in these investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.