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magazineWhat investment trusts’ first half performance tells us about the markets
Stockbroker Numis Securities’ review of the first half of 2018 for equity-focused investment trusts fits the pattern of the wider markets through the period.
It is very much a tale of two halves. In the first quarter trusts struggled amid a big setback for global stocks before a strong recovery in the second half.
Numis notes UK shares were among the top performers in this recovery with the FTSE All-Share up 9.2% in the three months to June for its strongest quarterly performance since the first three months of 2013.
Good progress was seen with global equity investment trusts with a focus on growth such as Scottish Mortgage (SMT) and Monks (MNKS).
The average discount to net asset value for equity investment trusts widened slightly in the period from 4.7% at the start of 2018 to 5.3%. Numis notes this is a tight level of discount relative to historical levels – with the average discount hitting 9.7% in mid-2016 following the Brexit vote.
The broker comments: ‘40 funds (29% of the equity investment companies universe by value) are trading at premiums and a further 30 funds (18%) at a sub-3% discount. Many of these funds are issuing new shares to meet investor demand.’
The report also finds that discounts have widened for funds investing in Europe and emerging markets and some healthcare trusts have moved from premiums to NAV to modest discounts.
Numis added two names to its recommended list in the period. One is Law Debenture (LWDB) which it notes benefits from a unique structure.
This includes a traditional investment portfolio managed by James Henderson from asset manager Janus Henderson and a financial services business, covering areas like pension funds, governance and whistle blowing, which provides a ‘consistent revenue stream that has provided a boost to Law Debenture’s yield’.
Numis notes sentiment towards the stock has been impacted by the soft performance of its UK-focused equity investments.
The team also highlights Vietnam Enterprise (VEIL) which has been hit by a sharp correction in the Vietnamese stock market since early April. (TS)
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