What investment trusts did investors buy in September?

Stock markets emerged from what is often thought to be a difficult month for shares on the front foot. Following a modest reversal in early September, shares rose after America’s central bank cut interest rates for the first time in four years.

The S&P 500 and the Dow Jones Industrial Average advanced to new record highs in the second half of the month. Meanwhile, the Nasdaq recovered more of the ground it lost in August, amid hopes the Fed’s 0.5% rate cut will benefit growth companies. Gold and bitcoin shared in the spoils as the dollar weakened. The former rose to almost $2,700 per ounce in late September¹.

Trusts focused on technology and income producing assets remained in firm evidence in September. Improved prospects for China’s economy and stock market also played a role, with two trusts investing in China and another dedicated to commodities taking top-10 positions.

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Scottish Mortgage returned to the top in September as US interest rates fell. Its heavy exposure to companies with the bulk of their earnings weighted into the future has been hampered by higher rates since 2022. The trust remains focused on global tech companies and can invest up to 30% of its portfolio in private businesses.

The trust’s top holdings saw some significant changes in September, with the Argentine e-commerce giant Mercadolibre, Amazon and the private company SpaceX displacing ASML, Nvidia and Moderna from the top of the leader board. The trust has also started new holdings in the Latin American digital banking group Nubank and the luxury goods brand Hermès. It currently trades at a 12% discount compared with around 10% a month previously².

City of London Investment Trust climbed to second from eighth in August. Once again, the portfolio navigated the market gyrations of the month well. The trust has benefitted of late from the continuing rehabilitation of UK shares in the global marketplace together with an investor appetite for yield. The trust currently trades at a 0.6% discount to its asset value and yields around 4.7%³. Please note this yield is not guaranteed.

Over the longer term this trust is recognised for its conservative investment approach and for its 58 years of continuous dividend growth. In its annual results released in late September, the trust reported a net asset value total return of 15.6% in the year to June compared with a total return of 13.0% from the FTSE All-Share Index⁴.

Having re-entered the top-10 in August in first place, Fidelity China Special Situations slipped to second in September. However, whereas the trust languished in August against a familiar backdrop of disappointing economic data, it sprang to life after China announced a raft of measures designed to boost both the economy and stock market.

This, the largest China focused investment trust, was joined for the first time in September by the Baillie Gifford China Growth Trust in sixth position. The latter is considerably smaller and more concentrated with its largest 30 holdings accounting for around 84% of assets⁵.

Both trusts hit turbulence in early October, triggered by disappointment over China’s failure to follow up its monetary easing with a substantial fiscal stimulus – new infrastructure projects, for example – although this could still come.

Polar Capital Technology Trust slipped a place to fourth. During September, the trust’s managers reaffirmed a positive view of AI, noting “AI data points remain constructive, including investment from the larger cloud providers and early examples of AI use cases”.

This positivity about AI is borne out by the trust’s largest holdings, which remained Nvidia, Microsoft and Apple at the end of August. The trust currently trades at a discount of around 11.7%, broadly unchanged from a month ago⁶.

JP Morgan Global Growth & Income, in fifth, was also down one place. This trust continues to perform well against its MSCI All Countries World Index benchmark and offers a prospective dividend yield of around 4.1%. Please note, this yield is not guaranteed.

The trust currently trades at a 2.5% premium to asset value, confirming that a solid capital performance coupled with an attractive yield come at a price. Mega-cap technology companies currently account for a large share of the top holdings alongside income producers including Munich Re and Nestlé. Interestingly, Apple is now only the tenth largest holding⁷.

BlackRock World Mining Trust returned to the top 10 for the first time since May in seventh place. Its shares have travelled a volatile path so far this year, amid fears of a US recession and weak growth in China. Given China’s predominant position in soaking up the world’s excess mining output, it was unsurprising to see mining shares and this trust recovering in September.

The trust currently trades at a discount of around 4% and had 24% weightings in both copper and gold at the end of August. These were in addition to a diversified mining exposure amounting to 32% of net assets⁸. Like the China trusts mentioned above and despite encouraging payrolls data out of the US at the beginning of October, BlackRock World Mining has experienced further volatility over recent trading sessions amid renewed China concerns.

Next up were two perennially popular multi-manager trusts. Alliance Trust climbed from tenth to eighth in September. The trust’s tie-up with Witan Investment Trust is expected to get the go-ahead this month following resolutions put to the shareholders of both companies. It’s proposed that the new trust will be named Alliance Witan.

Owing much to its “best ideas” approach, Alliance Trust continues to look very different from its global benchmark with, for example, the US insurance broker Aon and British drinks group Diageo among its top 10 holdings. Alliance Trust is well diversified with 211 holdings. It currently trades at a discount of 4.0%, down from 6.0% in August⁹.

The world’s oldest investment trust, F&C Investment Trust, was in ninth place compared with fifth in August. This trust is highly diversified over more than 400 companies and aims to smooth out the ups and downs of stock markets. Nvidia, Microsoft and Alphabet are the three largest holdings currently but their weightings are relatively modest – the largest accounts for 3.3% of the portfolio.

The trust has consistently grown its dividend for 53 years and also aims to increase its dividend faster than inflation over the long term. It currently yields about 1.4%¹⁰. Please note this yield is not guaranteed.

Allianz Technology Trust rounded out the table in September. This trust values the close proximity of its investment team to Silicon Valley and ventures deep into mid-cap tech companies alongside the six Magnificent Seven companies it holds among its top 10. Recent additions include Spotify and Netflix. Conversely, Western Digital and Pinterest have been sold. The trust currently trades at a discount of 11.2%, down a little from 11.6% a month ago¹¹.

Dropping out of the top 10 in September were Fidelity Special Values and TR Property Investment Trust.

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

1. Scottish Mortgage Investment Trust
2. City of London Investment Trust
3. Fidelity China Special Situations
4. Polar Capital Technology Trust
5. JPMorgan Global Growth and Income
6. Baillie Gifford China Growth Trust
7. BlackRock World Mining Trust
8. Alliance Trust
9. F&C Investment Trust
10. Allianz Technology Trust

Source: Fidelity Brokerage, 1-30 September 2024

Source:

¹ Bloomberg, 07.10.24
² Scottish Mortgage, 07.10.24
³ Janus Henderson, 07.10.24
⁴ Janus Henderson, 26.09.24
⁵ Baillie Gifford, 31.08.24
⁶ Polar Capital, 07.10.24
⁷ JP Morgan, 07.10.24
⁸ BlackRock, 31.08.24
⁹ Alliance Trust, 07.10.24
¹⁰ F&C, 07.10.24
¹¹ Allianz Global Investors, 08.10.24

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. 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.