Coronavirus one year on: UK investment trusts and funds perform best

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Most of the best-performing investment trusts in the 12 months since the UK went into its first coronavirus lockdown have been focused on UK or US shares.

The identities of the most successful funds over the year shows how taking a contrarian stance can pay off.

“Be fearful when others are greedy and greedy when others are fearful,” is the famous quote from Warren Buffett, while another that fits in these circumstances is from another investment guru, John Templeton.

“The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell,” said Templeton, who famously bought dozens of ‘value’ stocks on the eve of World War 2.

Similarly, in early March 2020, many investors in the UK and elsewhere dived for cover or ran for the hills.

On Monday, 23 March 2020, Britain went into full lockdown, with schools closed and the public getting used to wearing a mask to the supermarket and being restricted to one bout of outdoor exercise per day.

A day later, FTSE 100 index enjoyed its biggest-ever daily points gain, which was also the second-best day in its history in percentage terms, while one analyst cautioned that we were heading for another great depression

While this sparked warnings to be wary about jumping back into the stock market, many other investors were tempted to buy around what was seen for many stocks as bargain-basement territory.

Helped by that strong start, since 23 March last year London’s blue chip benchmark has risen 36%.

Pretty good, but nothing special, with the FTSE 250 putting on 66% and the wider FTSE All-Share adding 42%.

The US indices have grabbed the headlines, however, with the Dow Jones, S&P 500 and Nasdaq Composite all up over 70%.

Quietly beating them all, London’s AIM All-Share has jumped over 90%.

Any tracker fund following those indexes would have provided a perfectly good return, but if you wanted to beat the market you’d have needed to turn to individual shares and actively invested funds.

The top performing investment trust was the niche Geiger Counter Ltd (LON:GCL), which invests in companies involved in the exploration, development and production of uranium to supply the nuclear power industry.

It delivered a NAV return of over 290%, with the shares currently at their highest level since 2012.

Two UK-focused trusts are in second and third spots: Chelverton UK Dividend Trust PLC (LON:SDV) and Miton UK MicroCap Trust PLC (LON:MINI), both with returns over 150%. Also with a UK focus, the Aberforth Split Level Income Trust PLC (LON:ASIT) was also in the top 10.

“One of the more remarkable stories is the reversal of fortunes of the UK market,” says Teodor Dilov, fund analyst at Interactive Investor.

As Dilov says, UK equities were also being held back by Brexit concerns in recent years, and the gains have reflected the market’s increased certainty via the UK/EU trade deal and the Bank of England’s confidence in UK economy clawing back most lost ground over the next year.

“Far from the bleak outlook of yesteryear, the Bank of England’s forecast reflects a marked change of tone for the UK economy – further bolstered by the arrival of coronavirus and the UK’s rapid roll-out rate. That said, only eternal optimists would want to overlook potential bumps in the road.”

Also in the top 10 is a very popular pair with a strong focus on US tech companies, Scottish Mortgage Investment Trust PLC (LON:SMT), up 120%, and Baillie Gifford US Growth Trust PLC (LON:USA), up 149%.

The recovery in the UK market, however, does not quite mirror the pace of advance on the other side of the pond, where tech stocks have led the gains as they are seen as being beneficiaries of some of the ‘new normal’ trends such as working from home, gaming, not leaving the house, etc.

“The recent volatility we have seen in the tech sector again illustrates the importance of portfolio diversification – and is another reminder that one year’s winners might not be tomorrow’s,” says Dilov.

 

Top 10 best performing investment trusts since 23 March 2020 (to 15 March 2021)

Name  AIC sector NAV return
Geiger Counter Trust Commodities & Natural Resources 291.51
Chelverton UK Dividend Trust UK Equity Income 157.00
Miton UK Microcap Trust UK Smaller Companies 156.42
CQS Natural Resources Growth & Inc Commodities & Nat Resources 155.77
Baillie Gifford US Growth Trust North America 148.91
Pacific Horizon Trust Asia Pacific 146.18
TR European Growth Trust European Smaller Companies 120.43
Scottish Mortgage Trust Global 119.85
Aberforth Split Level Income Trust UK Smaller Companies 119.61
Edinburgh Worldwide Trust Global Smaller Companies 117.51

 (Source data: interactive investor/Morningstar as at 15 March 2021) 

 

As Dilov says, investors should take all short-term performance (a year is short-erm when it comes to funds) with a pinch of salt, with some of the best performances following previous struggles.

Among unit trust funds, US focussed funds account for four of the top 10 best performers, including the Legg Mason Royce US Small Cap Opportunity in second position with a 158% return, and the heavyweight Baillie Gifford American Fund, which returned 130% over the period.

But again it was outdone by a UK smaller companies fund, Premier Miton UK Smaller Companies Fund, which topped that charts – up 180%.

Marlborough Nano Cap Growth Fund (121%), another UK Smaller Companies fund, also made the top 10 list.

 

Top 10 best performing funds since 23 March 2020 (to 15 March 2021)

Fund Sector Return
Premier Miton UK Smaller Companies Fund UK Smaller Companies 180.76
Legg Mason Royce US Small Cap Opportunity Fund North American Smaller Companies

157.64

Junior Gold Trust Specialist 144.51
Marlborough Technology Fund Technology and Telecommunications 136.47
Schroder ISF Global Energy Fund Global 133.11
Baillie Gifford American Fund North America 129.97
Marlborough Nano Cap Growth Fund UK Smaller Companies 121.01
New Capital US Small Cap Growth Fund North American Smaller Companies 115.06
GlobalAccess US Small & Mid Cap Equity Fund North American Smaller Companies 113.92
Wells Fargo (Lux) WF US Select Equity Fund Global Bonds 113.88

       

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