These five trounced investment trusts will bounce back

The indiscriminate carnage in the markets has left these five promising investment trusts in the bargain basement.

Pershing Square’s top-notch US large-caps include Chipotle © Alamy

Investment trusts have been caught in the crossfire of the market panic. Because they are easy to sell instantly, many investors have bailed out of even defensive versions of these funds, eager to pocket cash.

Take the infrastructure sector, a traditional safe haven. Here we have government-backed assets and stable cash flows that should survive any recession. Yet the four big core infrastructure funds have seen their share price fall by around a fifth over the last month, while the average renewable energy infrastructure fund has fallen by more than 19%.

Ignoring recent progress

Some were probably overpriced, trading on chunky premiums to net asset value (NAV) before this crisis, but investors seem not to be differentiating. Take the JP Morgan Global Core Real Assets (LSE: JARA) fund, highlighted here a few months ago.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

This is a new fund that is deploying cash it raised late last year in a range of internal JP Morgan funds dabbling in everything from property to transport infrastructure. This portfolio is more cyclical than most. But the current discount to NAV of 19% appears harsh given recent signs of progress: the underlying portfolio was up 2.6% for the year before the crisis erupted.

Not every fund has been sold indiscriminately, however. Take Syncona (LSE: SYNC), for instance, a MoneyWeek favourite and the UK’s largest venture-capital investor in life sciences.

It has just said that the Covid-19 pandemic will result in delays to a clinical trials programme for its portfolio businesses, but it does have spare capital of £780m, the equivalent of 61% of net assets. So the programme can easily resume at some stage and carry on focusing on the genomics revolution.

The upshot is that the share price has held up well, slipping by just 12.5% year-to-date versus 31.7% for the FTSE All Share. The fund also trades at a 2% premium to its December NAV.

But not all tech funds have weathered the storm quite as well as Syncona. One of my personal favourites is Draper Esprit (Aim: GROW). This tech venture-capital fund is down nearly 40% year to date and on a near-50% discount to NAV. The group has just run a portfolio review, which it reckons shows that “80% of the portfolio, including most of the businesses in the core portfolio, has strong cash balance sheets and/or the ability to adjust costs to trade through a crisis lasting through 2020”.

Most of its big bets have raised plenty of cash and its portfolio also contains businesses that might benefit from the crisis, such as Push Doctor (an online medical consultation); Aircall (a cloud phone system); Kaptivo (cameras that upload writing on whiteboards to the internet) and Peak Games (a mobile-phone video-games outfit). Many of the key technological trends that were strong before the crisis aren’t going away. Bet against them at your peril.

Hedge funds that deliver

Consider also two stand-out successes over the last few weeks: Pershing Square (LSE: PSH) and BH Global (LSE: BHGG). These are two hedge funds that have delivered on what they promised – strong absolute returns.

Pershing Square boasts a portfolio of large-cap quality stocks – featuring well-known names such as Chipotle, a chain of casual Mexican restaurants, and Warren Buffett’s investment vehicle Berkshire Hathaway – that collectively returned 58% last year. These brands have deep pockets that will come in handy in the rebound.

Manager Bill Ackman has topped up holdings in Hilton and has re-entered Starbucks. But he has also been hedging the portfolio against declines and these bets paid off in the market downturn.

The last NAV numbers show that net assets were up 10.6% in the week to 9 March. Pershing Square’s sterling share price is currently down 17% over the last three months; NAV is up by 20.3% in that time span. The fund yields 2.9% on a 42% discount to NAV.

Last but by no means least, scratch your head and wonder what BH Global needs to do to keep investors happy. This hedge fund has slipped to a 11.4% discount to NAV, yet NAV returns were 13.7% over the last month and 14% over the last three months.

This is more of a “black-box” fund than Pershing Square (which is, in reality, a play on a small number of US mega large caps), with lots of different strategies under the bonnet. But it’s clear that its traders have been making money during the crisis. Yet its discount has widened. That seems unfair.

David C. Stevenson

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit as well as in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.