When considering what to invest in for the year ahead, it can be useful to take a look back to get an idea of the themes that did well the year before and those which fell out of favour.
There is no guarantee that a popular theme will sour, or that last year’s bottom performers will turn around this year – but investors of a contrarian mindset might at least generate some interesting ideas by looking at what’s proved hot and what has not.
A review of the top-performing investment trusts in 2021 shows that private equity very much dominated as a theme, following strong growth in the previous 12 months, according to Nick Wood, head of fund research at investment manager Quilter Cheviot.
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The best performing investment trusts of 2021
| Schiehallion | 103.1% |
| Geiger Counter | 91.3% |
| Vietnam Holding | 81.8% |
| BMO Private Equity | 66.2% |
| NB Private Equity Partners | 65% |
| SLF Realisation Fund | 61.6% |
| Tufton Oceanic Assets | 59.6% |
| Riverstone Energy | 56.6% |
| Ashoka India | 49.6% |
| Standard Life Private Equity | 49% |
| Source: JP Morgan & Quilter Cheviot, as at 31/12/2021 |
Looking down the top ten list of trusts, no fewer than five of the top ten were private-equity trusts.
Other strong performers of note included the VietNam Holdings (LSE: VNH) and Ashoka India (LSE: AIE) trusts, with total share price returns of 81.8% and 49.6% respectively. It is noteworthy that this comes at a time when ripples from Evergrande’s collapse in China are being felt by the economies. The trend underlines how emerging markets cannot be treated as a homogenous group.
The Indian stockmarket’s benchmark indices Sensex and Nifty 50 ended 2021 with gains of 22% and 24% respectively, which explains Ashoka’s presence among Cheviot’s best performers.
Compared with other investment trusts in India, Ashoka stands out. For instance, Aberdeen New India Investment Trust (LSE: ANII) rose by about 16%.
Other stand-out performers included Tufton Oceanic Assets (LSE: SHIP) which invests in shipping vessel and performed well at a time when economies globally are grappling with supply-chain disruptions.
Also performing well was Geiger Counter (LSE: GCL), which focuses predominantly on the uranium industry. It has benefited from a rise in uranium prices, which have gained around 40% since August to touch $43 a pound.
An analysis of all the trusts (including private-equity firms) and their portfolios indicated that information technology (IT), fintech, finance, and retail stood out as the overarching themes among other sectors such as e-commerce, aerospace, cybersecurity, mining, and energy.
The weakest-performing investment trusts from 2021
| Baillie Gifford Shin Nippon | -17.2% |
| Fidelity China Special Situations | -17.5% |
| Syncona | -18.8% |
| Golden Prospect Precious Metal | -20.6% |
| Edinburgh Worldwide | -20.9% |
| Petershill Partners | -21.6% |
| Biotech Growth | -24.6% |
| JP Morgan China Growth & Income | -25.2% |
| Baillie Gifford China Growth | -28.6% |
| DP Aircraft Limited | -74.8% |
| Source: JP Morgan & Quilter Cheviot, as at 31/12/2021 |
The laggards for the year included three names from growth-focused investment house Baillie Gifford, even as Schiehallion (LSE: MNTN), owned by the same group, was the best-performing trust with returns of over 100%.
Baillie Gifford Shin Nippon (LSE: BGS), which invests in smaller Japanese companies, lost 17%. Among its key holdings are companies focusing on semiconductors, clothing, and helmets.
Edinburgh Worldwide (LSE: EWI), meanwhile, which has significant holdings in Elon Musk-owned Tesla Inc and Space Exploration Technologies, also lost 20% as high-growth, low-profit companies fell out of favour amid concerns about rising interest rates.
“Baillie Gifford will naturally go through some difficult periods as a result of their growth style of investing, but it remains a quality investment house with first rate research capabilities. It would be no surprise to see these trusts bounce back in 2022, although maybe not delivering the same level of performance as their Schiehallion stablemate,” said Wood.
Two biotech-focussed funds, Syncona and Biotech Growth, found themselves in the bottom ten as well.
What about 2022?
The UK’s largest China Investment Trust, Fidelity China Special Situations (LSE: FCSS) along with JP Morgan China Growth & Income trust (LSE: JCGI) also featured among the worst-performing trusts, impacted by regulatory risks in the mainland and a volatile year for equities. Baillie Gifford China Growth (LSE: BGCG) had similar problems, losing 28% last year, unsurprising given China’s struggles last year.
So, will China continue underperforming its peers in 2022? Dale Nicholls, portfolio manager at Fidelity, argues that in the new year, the Chinese market may see healthy corporate earnings coupled with attractive valuations and fewer policy surprises.
As for India, hopes are high that it will continue to do well in 2022, particularly as investors China. For instance, Mobius Investment Trust (LSE: MMIT), owned by emerging market fund manager Mark Mobius has most of its assets parked in India – 28% – nearly triple its allocation in China.
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