What investment trusts did investors buy in May?

Stock markets continued to rise amid a heady mix of takeover activity and buybacks in May, although progress was eventually capped by uncertainty around the timing of potential interest rate cuts. Markets appear to have settled for one rate cut or two at most from the Fed this year, given that a strong labour market and economy have slowed the drop in US inflation.

The announcement of a UK general election wrong-footed stock markets. Even so, UK shares generally showed resilience in the face of this additional uncertainty, given that neither main political party is expected to wield outlandish economic policies if it wins. Having recorded a record high mid-month at 8,455, the FTSE 100 settled just slightly lower compared with the end of April.

Investment trusts with a growth remit dominated the sales tables once again last month, although a strong income producer investing in infrastructure also rejoined the list.

Fidelity European Trust was the most bought trust in May, up from third place in April. This trust continues to emphasise large businesses differentiated by their resilience and pricing power and has the Dutch silicon wafer lithography specialist ASML, Novo Nordisk and Nestlé as its top three holdings.

This trust is reasonably concentrated – its top 10 holdings account for around 48% of the portfolio and there are just 46 holdings in total. It currently trades at a discount of about 3.4%, down a little from 4.0% a month ago.

Fidelity China Special Situations returned to the top-10 most bought trusts for the first time since March. China’s domestic stock markets drifted sideways in May while remaining ahead year-to-date. These moves came despite signs of further improvement in manufacturing and services suggesting China’s nascent economic recovery remains intact.

In an interview with Fidelity’s Tom Stevenson in early May the trust’s manager Dale Nicholls reported a positive environment for stock pickers, with clear winners emerging and some companies delivering better shareholder returns in terms of buybacks and dividends. The trust currently trades at a discount of 10.5% to its net asset value, slightly up on 8.9% a month ago.

Scottish Mortgage slipped two places to third in May. News-flow related to the trust remained positive with the arrival of encouraging annual results and a £1 billion share buyback to be conducted over two years hovering in the background.

After two negative years, the trust posted a positive return in the year to 31 March while seeing its discount to net asset value decrease from 19.6% to 4.5%. Part of that move will have been down to the trust buying back its own shares at a total cost of £592 million. At the time of writing, the trust’s discount is 8.3% compared with 6.0% a month ago¹.

Nvidia has now overtaken ASML as the trust’s largest holding. Moderna remains in third after reports of positive early-stage trials of its mRNA cancer vaccine.

JP Morgan Global Growth & Income slipped two places to fourth. This trust aims to beat the MSCI All Countries World Index over the long term, which it has successfully managed to do since stock markets bottomed in 2020. This trust currently trades at a 2.5% discount to its asset value compared with a 1.7% premium a month ago. It has a prospective dividend yield of around 3.4%². Please note, this yield is not guaranteed.

Like many other global trusts, mega-cap technology companies dominate the top holdings, although there are understandably large weightings in income producers too, examples being Exxon Mobil and the financial services company CME Group.

Next was BlackRock World Mining Trust, shooting up the table from tenth position in April. Led by copper as well as gold and silver, some commodities have risen strongly lately. This reflects signs of an improving Chinese economy as well as supply shortages coupled with a rising demand for metals from the energy transition.

This trust – which trades at a modest discount of 2.2% – appears to be in a good place to capitalise on these trends with, for example, a 26% position in copper and 18% position in gold³.

F&C Investment Trust slipped from second to sixth. The trust aims to achieve dividend growth that beats inflation over the long term. It also aims to smooth out the highs and lows of stock markets, an ambition that has been assisted by 53 years of consistent dividend growth.

This trust holds more modest exposures to the technology behemoths that have driven world markets higher in the recent past and is currently invested in more than 400 companies over 35 countries. Microsoft is the largest holding accounting for 3.2% of the portfolio; Nvidia is next at 2.1%)⁴.

Alliance Trust, which reduced its positions in the “Magnificent Seven” mega-caps and other similar growth stocks in February in the belief that sentiment over AI had become excessively bullish, took seventh place. The trust continues to look very different from its global benchmark with, for example, the Brazilian oil giant Petrobras and the British beverages group Diageo among its top 10 holdings. Alliance Trust is well diversified and currently has 215 holdings⁵.

Fidelity Special Values, which returned to this list in April in seventh position, took eighth place in May. Investment Week’s Investment Company of the Year and Citywire’s Best UK All Companies Trust is a contrarian investor that searches out underappreciated companies mostly in the UK. Manager Alex Wright has been adding to the trust’s mid-cap and smaller company exposures recently through purchases of shares in Direct Line Insurance and the thread manufacturer Coats, among others.

This trust continues to offer an exposure to companies generally not covered by other popular UK focused funds and currently trades at an 8% discount. Current large holdings include the Irish sales and marketing group DCC, Imperial Brands and the Swiss pharmaceuticals giant Roche.

Greencoat UK Wind, in ninth place, was investors’ preferred way of capitalising on the global energy transition. It last featured among the top-10 best sellers at Fidelity in December 2023. The trust has benefitted from its exposure to inflation-linked revenues and high power prices over the past year. In February, the trust reported that it supplied 1.5% of the UK’s total energy demand in 2023 and that it has now paid £1 billion in dividends since its stock market listing in 2013⁶.

Finally Allianz Technology Trust returned to the best sellers list in tenth place. This trust’s managers continue to report a high level of conviction in secular growth trends within technology, in the belief we are still early in the spending trend supporting this sector. Nvidia, Microsoft and Meta are the current top holdings. Amphenol – a US supplier of electronic and fibre cables and connectors – got added to the portfolio in April. The trust currently trades at a discount of 12%⁷.

Top 10 best-selling investment trusts on Fidelity’s Personal Investing platform in May 2024

1. Fidelity European Trust
2. Fidelity China Special Situations
3. Scottish Mortgage Investment Trust
4. JPMorgan Global Growth and Income
5. BlackRock World Mining Trust
6. F&C Investment Trust
7. Alliance Trust
8. Fidelity Special Values
9. Greencoat UK Wind
10. Allianz Technology Trust

Source: Fidelity Brokerage, 1-31 May 2024

Source:

¹ Scottish Mortgage, 05.06.24
² JP Morgan, 05.06.24
³ BlackRock, 30.04.24
⁴ F&C, 30.04.24
⁵ Alliance Trust, 30.04.24
⁶ Greencoat UK Wind, 29.02.24
⁷ Allianz Global Investors, 06.06.24

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.