To me the current market malaise feels like a necessary readjustment to worsening prospects, rather than a major movement of the tectonic plates. Still, I suspect it’s better to be cautious and plan for the worst. In that spirit, I’ve been taking stock of what has worked for investment trusts over the year to date.
The first group contains the funds that have benefited from very specific tailwinds offered by the current economic situation. This includes renewables funds, such as Greencoat UK Wind (LSE: UKW), Bluefield Solar (LSE: BSIF), Foresight Solar (LSE: FSFL), NextEnergy Solar (LSE: NESF), Ecofin US Renewables (LSE: RNEP) and JLEN Environmental Assets (LSE: JLEN). These have year-to-date growth in net asset value (NAV) of 19.4%, 19.3%, 19%, 21.9%, 20.6% and 27.5% respectively, according to data from Numis.
The battery-storage funds Gresham House Energy Storage (LSE: GRID) and Harmony Energy Income (LSE: HEIT) have also turned in some impressive gains (17.3% and 19.9% respectively), helped in part by the increased interest in energy security and stability and the move to net zero. There is a lingering worry that some renewables funds will be clobbered with windfall taxes, but I think that is overstated. Also in the energy sector, Geiger Counter (LSE: GCL), which invests in uranium stocks, has seen NAV growth of 31%. Riverstone Energy (LSE: RSE), an investment trust that specialises in the energy industry, has returned 22.4%
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Ships and planes
Shipping funds, such as Taylor Maritime (LSE: TMIP) and Tufton Oceanic (LSE: SHIP) have year-to-date growth of 47% and 29.1% respectively, but their superb results have been largely ignored by investors, who fear an impending recession.
Aviation funds such as Amadeo Air Four Plus (LSE: AA4), with NAV growth of 27% year to date, and DP Aircraft (LSE: DPA) have also benefited from specific events, where uncertainty about the value of leases for Airbus A380s has begun to resolve.
Logistics funds look cheap
The owners of logistics assets such as Warehouse Reit (LSE: WHR) and Urban Logistics (LSE: SHED) have also benefited from some very impressive NAV returns (18.1% and 18.3%). Urban Logistics recently revealed a record 29% NAV return, which contrasts starkly with worries about a downturn in demand for “big box” logistics spaces. However, both have seen share prices fall, unlike most funds on this list. This area of the market is starting to look cheap unless the bottom falls out of demand as Amazon decides to scale back its growth ambitions.
The best defensive funds
The last category is defensive funds. The traditional stalwarts in this category are Ruffer Investment Company (LSE: RICA), Personal Assets (LSE: PNL) and Capital Gearing Trust (LSE: CGT), which are broadly flat so far this year.
However, in my view, the stand-out stars have been BH Macro (LSE: BHMG) and BioPharma Credit (LSE: BPCR), which have returned 19.4% and 26.2% respectively. BH Macro has demonstrated why investing in hedge funds is not always an exercise in paying high charges to chasing the mirage of past performance. BioPharma Credit has delivered on the promise of lending to niche borrowers at attractive rates that are not correlated to the business cycle.
A mention should also go to two low-profile funds. Round Hill Music Royalty (LSE: RHM) invests in music rights and has delivered a 21% uplift in NAV. Literacy Capital (LSE: BOOK) is a tightly held, relatively new private equity fund that focuses on small- to mid-cap UK private businesses. Unlike nearly all its PE peers, it trades at a chunky premium, powered in part by impressive NAV returns, including a gain of 24.7% so far this year.
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 davidstevenson.substack.com
David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com 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.
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