Last-minute Isa shopping? Here are 7 investment trusts to consider

With the stocks and shares Individual Savings Account (Isa) deadline approaching this week, Rupert Hargreaves rounds up seven investment trusts you may want to consider.

The stocks and shares Individual Savings Account (Isa) deadline for the 2021/22 tax year is 5th April 2022. Investors have until midnight of 5 April to use as much of their £20,000 annual allowance as possible. 

As this is a “use it or lose it” allowance, any unused allocation is not rolled over into the 2022/23 tax year. However, there's no requirement to invest this cash before the deadline. 

As long as the money is in the account before the cut-off, investors can take their time to find opportunities. 

Understandably, many investors might not be in a position to use the whole allowance every year. The latest figures available from HMRC show that in the 2017/18 tax year, 44% of savers put away between £1 and £2,499. Still, the tax benefits of Isas and the fact that withdrawals are not limited mean that, whatever your financial situation, it makes sense to save in one of these tax-efficient accounts. 

And if you’re looking for ideas as to what to put in them, the investment trust sector offers a fertile hunting ground.

Why investment trusts? 

There are over 600 investment trusts available to investors in the UK. Unlike “open-ended” investment funds like unit trusts or Oeics, investment trusts trade on the stock exchange. This means that the share price of the trust can diverge from the value of the underlying portfolio (this is known as trading at a premium or discount to net asset value, or NAV).   

This “closed-end” structure means that investment trust managers have a fixed pool of capital to invest with. This in turn means they can take a longer-term view and also more easily hold non-traditional or illiquid assets than managers of open-ended funds, who have to maintain sufficient liquidity in the portfolio to meet redemptions if necessary. 

Digital 9 Infrastructure (LSE: DGI9) is a great example of the flexibility an investment trust structure can offer. The trust raised £300m last year to invest in a range of assets to help "deliver, inter alia, a reliable, functioning internet." So far, the firm has acquired several interests in subsea fibre cables and data centres. It is targeting a 6p per share annual dividend to begin with and a progressive dividend policy. Based on this target, the trust supports a yield of 5.4%. 

Digital 9 is one of the few ways investors can build exposure to this specialist sector and could be suitable for both income and growth investors. But if subsea fibre cables and data centres are not your thing, there are hundreds of other options out there to choose from. 

Generating an income from UK equities

One of the biggest and most popular UK equity income trusts is the City of London Investment Trust (LSE: CTY). The trust owns a selection of some of the UK’s top blue-chip income stocks. The top holdings are cigarette group British American Tobacco, drinks group Diageo and oil major Shell (as you may have guessed, it’s not an ESG trust). It yields 4.6% and has consistently paid and increased its payout for more than five decades now. 

A MoneyWeek favourite in the UK equity income space is the Law Debenture Trust (LSE: LWDB). This trust has a unique structure in that it operates a professional services company alongside the investment portfolio. The division provides services such as pension and whistleblower management for other corporations, bringing in a steady, recurring income stream. This also gives the firm’s portfolio managers more flexibility. They can look outside the traditional UK equity income space when hunting for opportunities. 

Thanks in part to this structure, although its dividend yield of 2.8% is not the highest around, the stock has produced a total return of 200% over the past ten years, outperforming the FTSE All-Share Index’s 94.9%. 

Going global  

The UK equity market only constitutes a small fraction of the global equity market. As such, building exposure to international equities makes a lot of sense for most investors. International trusts are a great way to build exposure to these markets.

JPMorgan Global Growth & Income (LSE: JGGI) seeks out income and growth stocks around the world. Some of the largest holdings in the portfolio are the high-flying tech stocks Amazon.com, Alphabet and Microsoft. Last year it paid a total dividend of 13.16p per share, which, if repeated, gives the trust a yield of 2.9%. 

Murray International Income (LSE: MYI) is another international income trust with a flexible mandate. It invests principally in global equities, but it also owns a portfolio of fixed income assets. Its equity portfolio is incredibly diverse. Just 5.5% is allocated to the UK. Nearly half of the firm’s portfolio is allocated to securities in Asia and Latin America. At the current share price, the trust yields 4.6%. 

Specialist options to protect wealth and invest in health

RIT Capital Partners (LSE: RCP) – another constituent of the MoneyWeek model investment trust portfolio, alongside Law Debenture – has been publicly traded since 1988. Since its inception, the trust has produced a total return of 12.4% a year for its shareholders. The firm’s overriding aim is to protect and enhance shareholders’ wealth. 

It does this by investing in a diverse portfolio of assets, from private companies to equities and hedge funds. While income investors might be put off by the trust’s relatively low 1.5% yield, for those looking to protect their wealth, RIT certainly has a great record of doing just that. 

Finally, Life Sciences REIT (LSE: LABS) is another great example of how investment trusts can help individual investors build exposure to unique assets. Launched last year, the trust is seeking to generate an income for investors of 4–5% a year as part of a 10% target net asset value (NAV) return. It focuses on properties in the so-called life science "Golden Triangle" of Oxford, Cambridge and London. Since its IPO in November, it has completed five acquisitions, totalling nine individual properties, for a total value of £184.2m.

(Disclosure: I own shares in Law Debenture Trust and JPMorgan Global Growth & Income)

Recommended

Is it time to pick up growth stock bargains yet?
Investment strategy

Is it time to pick up growth stock bargains yet?

If you’re thinking of picking up some bargains from the tech stock crash, beware – there are still plenty of “growth traps” out there. John Stepek exp…
26 May 2022
A fund that should give good returns from investing in good deeds
Share tips

A fund that should give good returns from investing in good deeds

Schroders BSC Social Impact Trust has made a solid start and looks more attractive than it did at launch, says Max King.
26 May 2022
Wall Street’s sell-off has further to go
US stockmarkets

Wall Street’s sell-off has further to go

The current stockmarket sell-off has been led by tech stocks, but the pain is spreading. The bear market has further to go – US stocks are still expen…
25 May 2022
Law Debenture investment trust update: premium over net assets slips
Investment trusts

Law Debenture investment trust update: premium over net assets slips

Saloni Sardana looks at the latest update from the Law Debenture investment trust, one of the six funds in MoneyWeek’s model investment trust portfoli…
25 May 2022

Most Popular

The world’s hottest housing markets are faltering – is the UK next?
House prices

The world’s hottest housing markets are faltering – is the UK next?

As interest rates rise, house prices in the world’s most overpriced markets are starting to fall. The UK’s turn will come, says John Stepek. But will …
23 May 2022
Everything is collapsing at once – here’s what to do about it
Investment strategy

Everything is collapsing at once – here’s what to do about it

Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect th…
23 May 2022
Three high-yielding FTSE 250 dividend stocks I’d invest in right now
Share tips

Three high-yielding FTSE 250 dividend stocks I’d invest in right now

The average FTSE 250 dividend yield is around 2.4%, but many stocks yield much more. Rupert Hargreaves picks the best FTSE 250 stocks for income inves…
23 May 2022