Alternative strategies emerged as some of the best performing trusts of 2019 although there were some encouraging signs for UK equity investors after years of being one of the most unloved markets.
After a strong year for markets – and the close of a bullish decade – there were many reasons for investors in the closed-ended space to celebrate.
Source: FE Analytics
On sector level, the best performing peer group was IT Insurance & Reinsurance with an average return of 64.91 per cent. However, it is worth noting that the sector – home to strategies investing in insurance and reinsurance-based instruments - is a relatively niche, consisting of just two trusts.
The sector’s strong returns were primarily by just one fund: the $90.4m Acheron Capital Limited Life Settlement Asset trust, which was up by 69.1 per cent last year and the third best performing trust overall.
Excluding the unclassified, multi-manager and eight VCT sectors, several other peer groups focused on alternative investment strategies were among last year’s top performers, including IT Infrastructure Securities, IT Property Securities and IT Environmental. Although these too are homes to just a handful of funds.
European equity strategies also performed well with all four sectors making an appearance among the top-20 sectors.
However, it was a good year for markets broadly and – as such – most of the large equity sectors performed well, including UK equities.
The market has been one of the most unloved among investors since the EU referendum of 2016.
However, last year the average IT UK All Companies sector made a 28.45 per cent gain, while the IT UK Smaller Companies peer group made a return of 24.1 per cent.
Sentiment towards the UK has improved in recent months as the Conservative party won the December general election paving the way for a Brexit withdrawal agreement negotiated by prime minister Boris Johnson and the possibility of a left-wing Labour government under Jeremy Corbyn receded.
This change can be seen in the make-up of the top-20 individual trust performers with more domestically focused UK smaller companies strategies making the list
Georgina Brittain and Katen Patel’s JP Morgan Smaller Companies was the second best performer of the year with a 67.53 per cent total return
The BlackRock Throgmorton trust – overseen by Dan Whitestone – also performed strongly, making a 60.51 per cent return.
In addition, the only IT UK All Companies trust featuring in the top-10 also focused lower down the market cap scale in mid-caps. The Schroder UK Mid Cap trust – managed by FE fundinfo Alpha Manager Andrew Brough and Jean Roche – made a return of 58.71 per cent last year.
Source: FE Analytics
However, the best performing trust of 2019 was the £18.8m New City Investment Managers Golden Prospect Precious Metals trust, with a return of 77.46 per cent.
The trust managed by Rob Crayfourd and Keith Watson benefited from positive trends in the precious metal space, bouncing back from a 44.09 per cent loss in 2018.
Performance of trust vs sector & benchmark in 2019
Source: FE Analytics
It was a good year for precious metals such as gold, as geopolitical uncertainty surrounding the US-China trade war and direction of Federal Reserve policy saw a rally in prices for the yellow metal.
Whilst the majority of investment trusts managed to make positive returns last year – with 82.63 per cent in positive territory - there still some loss-making trusts.
The biggest loss was recorded by Riverstone Energy trust, which was down by 61.52 per cent in 2019.
In October, David Leuschen and Piere Lapeyre, co-founders of management firm Riverstone, noted that market conditions for exploration and production investments continue to face severe headwinds five years on from the start of the commodity cycle downturn.
Source: FE Analytics
Other strategies at the foot of the performance table, included Adamas Finance Asia (down 58.95 per cent), Ashmore Global Opportunities (with a loss of 28.92 per cent) and Schroder UK Public Private Trust (down 53.29 per cent).