Some of the best performing investment trusts of the past few years have suffered up to 25% falls in value during the opening month of 2022, according to the latest performance figures.
High growth technology companies have taken a beating during January amidst fears of rising interest rates from central banks and a withdrawal of the US Federal Reserve’s quantitative easing (QE).
Portfolios run by Baillie Gifford – which specialises in investing in high-growth technology companies – have been severely hurt by the sell-off in growth stocks over the past month.
The Baillie Gifford US Growth Trust, Scottish Mortgage Investment Trust and Keystone Positive Change Investment Trust were amongst the hardest hit as growth stocks suffered from the widespread market rout.
Despite being top-performers of their sectors over three- and five-years, these investment trust giants were down 25.1%, 21.6% and 19.3% respectively over the month.
Another trust that invests heavily in technology was also badly hit. The Allianz Technology Trust, a top performer over the past five-years and a beneficiary of the rise of tech stocks, is down 18.9% for the month.
Elsewhere, investment trusts that specialise in biotechnology companies were amongst those that fell the furthest during the month, as markets braced for interest rate rises and started discounting their future earnings more heavily.
The Biotech Growth Trust, RTW Venture Fund and the BB Healthcare Trust were down 21.8%, 21.7% and 16.9% respectively.
The table below shows the 30 worst performing investment trusts over the month of January.
Source: FE Analytics
There were also a significant number of smaller companies’ investment trusts that suffered from heavy declines in January, such as Baillie Gifford Edinburgh Worldwide, Montanaro European Smaller Companies Trust and Herald Investment Trust.
These investment trusts were not spared as markets slashed the valuations of high growth small- and mid-cap stocks – the bread and butter of these strategies.
But when it comes to the best performers of month, certain specialist investment trusts that focus on areas such as commodities, energy and infrastructure came out on top.
Below is a table of the best 30 performing investment trusts for the month of January.
Source: FE Analytics
The top-performer was Origo Partners Plc, up 36% over the month of January. The private equity investment company has stakes in mining and energy businesses based in China and Mongolia.
Another top performer was Riverstone Energy Limited, which was up 19.1%. This trust invests in public and private companies involved in the energy industry.
Both trusts benefitted from a boom in the value of energy businesses over the month as crude prices soared by almost 17% amidst rising political tension between major oil player Russia and its neighbour Ukraine.
Elsewhere in the table there were a number of infrastructure and property investment trusts that also performed strongly.
Bloomsbury Infrastructure India, Pantheon Infrastructure, BMO Commercial Property Trust and Standard Life Investments UK Commercial Property REIT all featured amongst the top performers.
Real assets such as infrastructure and property are seen as safe havens during periods of inflation and rising interest rates, due to their ability to pass on rising costs.
Despite the sell-off in global equities, there was one global equity investment trust that featured in the top-30. This was the Scottish Investment Trust, up 6.4% over the month despite the fact that the overall IT Global sector was down 9.5%.
This trust benefitted from its portfolio, which is invested almost exclusively in value industries such as energy, mining and financials – all experienced strong performance over the month.
Value stocks held up well over the month of January when compared to growth stocks, as these three industries that hold companies classified as ‘value’ were the very businesses that benefitted the most from rising interest rates and inflation.
Two UK equity income investment trusts also featured in the top-30 performers, namely the RWC Temple Bar Investment Trust and the Janus Henderson Lowland Investment Company.
Both trusts have gained from their overweight exposure to the large energy and financial stocks listed in the UK, which have fared well for the same reasons as above.
The strong performance of energy, commodities and financials also explains the performance of the broader investment trust sectors.
The IT Latin America sector, IT Commodities & Natural Resources sector and IT Financials sector were amongst the top-10 performers for the month.
Source: FE Analytics
Like the commodities and natural resources sector, the Latin America sector was boosted by the strong presence of the major energy companies in the region.
The broader sectors also reflected the performance of the worst hit individual trusts. The IT Growth Capital, IT North American Smaller Companies and IT Biotechnology & Healthcare were the three poorest-performing sectors overall.
A number of smaller companies sectors and the technology & media sector were also amongst the worst performing investment trust peer groups for the month.