Although investment trusts have seen a resurgence in new issues of late, particularly in specialist areas, it seems buyers still have a clear preference for well-established products, particularly those with an income bias.
This is the standout conclusion having seen Alliance Trust Savings list of the 20 most popular purchases on its platforms so far this year.
Traditional income
High up on the list are trusts such as City of London, Edinburgh Investment Trust and Merchants. All three can also be found on a recent grouping of the highest yielding equity funds formulated by Oriel Securities – Merchants has the third highest yield on Oriel’s list, at 5.5% while City of London is eighth with a 4.5% historic yield.
Another draw for investors is the fact that trusts like the City of London has one of the longest running dividend histories in the UK market. City has raised its dividend for some 44 consecutive years, a record closely followed by Alliance Trust, which unsurprisingly is the best seller on Alliance’s platform so far this year.
Alliance’s list of the most popular vehicles is fairly indicative of the way buyers approach this market, preferring well-established companies to the more recently launched offerings.
Income view
Last month the Association of Investment Companies published a list of the top ten most viewed member investment companies in May and every single one is also present on Alliance’s report of best sellers. The AIC too noted the income bias to its research, pointing out that most of the income funds featured were also trading at a premium.
While the income inclination is understandable given current market conditions, the Alliance Trust list also highlights buyer partiality for long-term track records. Even in areas of the market considered more faddish, the trusts on Alliance’s list have relatively long histories.
For example, commodities may be a trend many associate with the past few years but the 14th ranked Blackrock World Mining has been in existence since 1993 while 15th ranked City Natural Resources High Yield was launched in 2003. They are not the only resources-focused trusts in existence but they are the oldest of the AIC members in that sector.
In addition, while there are several emerging market mandates on offer, some issued as recently as last year, it is the Templeton Emerging Markets portfolio that features among the best sellers this year. It was launched in 1989, making it one of the older investment trusts exposed to that sector.
Many may deem investment trust purchase activity as reflective of relatively conservative buying but it could be argued instead that eschewing new launches in favour of proven, traditional vehicles is a sensible choice these days.
They have been around this long for a reason.
