What investment trusts did investors buy in March?

Stock markets continued in a positive vein in March. America’s S&P 500 and the Nikkei 225 Index in Japan made new record highs, while markets in Europe and elsewhere in Asia also recorded good gains. Even the FTSE 100 took part, rising to within a whisker of the 8,000 mark at the end of the month boosted by rising commodity prices.

Meanwhile China’s domestic stock markets cast off their year-long malaise amid signs of modest economic improvements and as the authorities directed local institutions to raise their participation.

The long-awaited pivot to lower interest rates appeared to come a little closer, as the US Federal Reserve reiterated guidance for three quarter-point cuts in the second half of the year. Switzerland became the first country to see an actual cut. Japan was out of step, finally increasing interest rates for the first time in 17 years. However, Japan’s chosen course is not expected to alter the global picture.

Scottish Mortgage – the most popular investment trust among Fidelity’s personal investors in March – rocked the investment trust world with the announcement of a £1 billion share buyback. While the trust has only pledged to carry out the buyback over the next two years, the effect on sentiment was more or less immediate.

The trust’s discount to NAV has returned to around 8% compared with around 14% a month ago, lower even than the prevailing discounts among its main technology biased rivals¹. Hopes that an influential activist shareholder might stimulate positive activity among the trust’s private equity holdings also boosted sentiment.

F&C Investment Trust was the month’s strongest riser, gaining six places to second. The world’s oldest investment trust offers investors a global exposure spread over in excess of 400 companies. As such, it is considerably less concentrated than many other popular global trusts and may demonstrate defensive qualities on a relative basis if the mega-cap tech winners of the recent past start to falter.

Microsoft is the largest holding, but it only accounts for around 3% of the portfolio. With 53 years of unbroken dividend growth, the trust aims to achieve dividend growth that beats inflation over the long term. It also targets smoothing out the highs and lows of stock markets².

JP Morgan Global Growth & Income slipped a place to third. This trust aims to beat the MSCI All Countries World Index over the long term, which it has done since stock markets bottomed in 2020. The trust currently trades at a 1.2% premium to its asset value with a prospective dividend yield of around 3.4%³. Please note, this yield is not guaranteed.

While management remains cautious about the macroeconomic environment in 2024, it sees corporate earnings growing by about 10% globally. If this is achieved, stock markets should remain well supported.

In fourth place, City of London Investment Trust was the month’s best selling UK focused trust.  Like the two aforementioned trusts, City of London aims for a combination of long-term income and capital growth.

Given the UK stock market’s continuing low valuation compared with international markets, this is a trust that may interest contrarian investors. Since over 60% of the revenues of the companies it is invested in come from overseas, it effectively offers an exposure to global corporate profits at a discount.

The trust has now chalked up 57 years of continuous dividend growth and currently yields an inflation beating 5.0%. Please note this yield is not guaranteed⁴. You can read more on the City of London Investment Trust here.

HICL Infrastructure was last month’s new entry and the only trust investing in alternative assets to make the top 10.

At the end of February, the trust sold its stake in the US Northwest Parkway toll road at a 30% premium. The disposal cast further light on the low valuation the stock market has historically applied to the trust’s assets and to the infrastructure sector generally.

HICL pledged to cut debts and start a £50 million share buyback following the sale. The trust has concluded asset sales totalling more than £500 million over the past 12 months. It currently trades on a yield of 6.5%⁵. Please note, this yield is not guaranteed.

Fidelity European Trust rose a position to sixth compared with February and remained the top pick for a European exposure. This trust continues to emphasise large businesses differentiated by their resilience and pricing power and has Nestlé, Novo Nordisk and ASML as its top three holdings. The trust currently trades at a discount of about 5.2%, down a little from around 6.8% a month ago.

Next up was Alliance Trust, which famously adopted a multimanager approach to diversify style risks in 2017. This trust has achieved a dividend increase every year since 1966.

Interestingly the trust reports having trimmed its positions in the “Magnificent Seven” mega-caps and other similar growth stocks recently in the belief that sentiment regarding AI has become excessively bullish. Capital has been redeployed to companies with lower valuations.

Among the trust’s more unusual top-10 holdings currently are the Brazilian oil giant Petrobras and MercadoLibre (Latin America’s version of eBay)⁶.

Technology focused trusts took the next two places. Allianz Technology Trust slipped from fifth to eighth. This trust’s managers continue to report a high level of conviction in secular growth trends within the tech sector, from AI and machine learning through the “Internet of Things”, cyber security and digital assets. The trust currently trades at a discount of around 11%⁷.

Polar Capital Technology Trust was down from fourth to ninth. Nvidia (10.5% of the portfolio) overtook Microsoft (10.0%) as the trust’s largest holding in March. The trust’s largest sector weighting – in semiconductor and semiconductor equipment companies – also increased, to 35% of total assets. Manager Ben Rogoff reports being fairly fully invested, due largely to the management team’s conviction in the powerful secular tailwind associated with generative AI. The trust trades at a discount of around 9.4%, little changed from February⁸.

Rounding out this list was the Fidelity China Special Situations. It continued to register progress broadly in-line with stock market recoveries in mainland China and Hong Kong over the month.

Some signs of economic improvement – including inflation turning positive for the first time in six months in February – as well as government directives encouraging the support of domestic institutions were positive factors. The trust currently trades at a discount of 8.9%, down slightly from around 9.6% a month ago.

Top 10 best-selling investment trusts on Fidelity’s Personal Investing platform in March 2024

1. Scottish Mortgage Investment Trust
2. F&C Investment Trust PLC
3. JPMorgan Global Growth and Income PLC
4. City of London Investment Trust
5. HICL Infrastructure PLC
6. Fidelity European Trust PLC
7. Alliance Trust
8. Allianz Technology Trust PLC
9. Polar Capital Technology Trust
10. Fidelity China Special Situations PLC

Source: Fidelity Brokerage, 1-31 March 2024 

¹ Scottish Mortgage, 08.04.24
² F&C, 31.01.24
³ JP Morgan, 08.04.24
⁴ Janus Henderson, 08.04.24
⁵ HICL Infrastructure, 08.04.24
⁶ Alliance Trust, 29.02.24
⁷ Allianz Global Investors, 08.04.24
⁸ Polar Capital, 08.04.24

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing, please read the relevant key information document which contains important information about each investment trust. The shares in these investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.