The investment trust tops and flops of 2018

2018 was a lousy year for equities, but some investment trusts managed to produce positive returns.


The numbers are in for 2018 and overall it doesn't look great. Let's start with the deepest and broadest pool of funds, global equity funds. The MSCI World index was down 4% over the full year and 11% over the last quarter. Data from Numis reveals that the 23 global-equity investment trusts delivered a price return over three months of -11.5% and -2.2% over one year. But Caledonia managed positive gains at both the three-month and 12-month level, as did Hansa Trust, Miton Global Opportunities and Henderson Alternative Strategies.

Sticking with this global theme, did the much smaller sector of defensive equity funds provide some respite? Yes. Numis tracked nine of these funds with familiar names, including Personal Assets, RIT and Lindsell Train and overall they managed to cut losses to an average of 4.6% over the last three months and 0.7% for the last year. The conservatively managed Capital Gearing Trust made losses of just 0.7% over the last three months and a gain of 2.7% over the year.

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UK-focused equity funds had a poor 2018. The FTSE All Share index lost 10% in the last quarter and 8.8% over the year. The broad UK All Companies sector lost 13% and 8.8% respectively, while UK Equity Income funds only performed a percentage point or two better. Still, Sanditon Investments notched up positive gains both in the last quarter and over the year. In the dividend-focused income sector, I'd highlight Murray Income, which managed to cap losses both over the last quarter and the last year at just over 4%, with the Value and Income Trust not far behind.

A big surprise

Now for the big surprise. Given just how turbulent markets were in 2018, you'd have expected internationally minded investors to abandon volatile emerging markets (EM) and head into "cheaper" and "safer" Japanese equities. Yet Japanese equity funds all tanked while global EM and Asia Pacific ex-Japan funds notched up much smaller losses, especially in the last quarter. Might this be a first sign that the underperformance of EM stocks could reverse? Worth singling out are Edinburgh Dragon, Pacific Assets and the two JP Morgan EM funds, one of which is focused on income stocks.

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Did the world of alternative funds provide much respite? The wooden spoon belongs to the private-equity sector consisting of 13 funds. Overall, this sector lost an average of 8.7% over the year and a nasty 13.9% over the last quarter, although Apax Global Alpha, JPEL Private Equity and LMS Capital made impressive returns. Property funds also didn't manage to provide much relief. On average the 14 funds in this sector fell by 3.7% over the last quarter and 1.4% over the full year. Standout funds include Regional REIT, LXI REIT and Impact Healthcare.

The good news for defensive investors is that infrastructure funds had an excellent year, with most notching up positive returns over both periods. Meanwhile, when it comes to hedge funds, the Brevan Howard Macro trust produced a 6.6% gain over the last quarter and a 19% profit inthe last year.

The names to watch

So I'd suggest if you are a more defensive, cautious investor looking for managers who have a proper track record of outperforming a sell-off, the shortlist of funds still looks pretty familiar: Capital Gearing, Personal Assets, the Brevan Howard funds (especially the Macro fund), and infrastructure funds generally (notably the HICL and BBGI trusts). Sanditon Investments, Henderson Alternative Strategies, Murray Income, Pacific Assets and JP Morgan Emerging Markets also all look as though they've successfully implemented smart investment strategies in a difficult market.




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