Coronavirus beating investment trusts have appeal

Coronavirus beating investment trusts and investment company sectors which have outperformed could focus investor's attention on these vehicles. Annabel Brodie-Smith highlights some research

 Coronavirus beating investment trusts

Renewable Energy investments have held up the best during the market downturn.

The past few weeks have been among the most volatile periods for markets in living memory, as investors continue to react to the covid-19 pandemic. The FTSE 100 and S&P 500 are down 27% and 13% respectively and the average investment company has fallen 16% over the last six weeks*. However, some investment company sectors have been less affected than others and several investment companies have delivered positive returns in spite of sharp market losses.

At the Association of Investment Companies we have assessed the ten sectors that have held up best since 31 January 2020 and the best-performing individual companies over the same period.

Renewable Energy Infrastructure has suffered the shallowest fall of 3.2%, followed by Debt – Direct Lending which is down 4.4% and Growth Capital which has lost 5.8%. Completing the top five are Hedge Funds and Infrastructure which have fallen 7.2% and 8.6% respectively.

It’s been an alarming few weeks for investors and all investment company sectors have suffered losses. Renewable Energy Infrastructure has been in strong demand for its high yields and the underlying assets of these investment companies such as wind farms, solar parks and energy storage have a lower correlation to the wider stock market. Other sectors that focus on alternative assets, such as infrastructure, hedge funds, and debt, have also suffered shallower losses than the market. Of the ten best-performing sectors, seven invest in alternative assets.

While the coronavirus outbreak is very worrying, investors can take comfort from the fact that investment companies have been around for over 150 years and survived two World Wars, the Great Depression and the global financial crisis. The current unpredictable market movements provide a stark reminder of the need to take a long-term view of your investments.

The top 10 performing investment company sectors since 31 January 2020

RankAIC sector% share price total return
31/01/2020 – 13/03/2020
Average investment company (ex VCTs)-16.2
1Renewable Energy Infrastructure -3.2
2Debt – Direct Lending-4.4
3Growth Capital-5.8
4Hedge Funds-7.2
5Infrastructure-8.6
6Financials-10.0
7Debt - Structured Finance-10.3
8Biotechnology & Healthcare-10.3
9Debt - Loans & Bonds-11.1
10Asia Pacific-11.7

Source: AIC/Morningstar.

Top-performing AIC member investment companies

The top ten performers in the AIC member universe over the past six weeks come from a range of sectors.

BH Global and BH Macro each features twice in the list. Their US dollar share classes have delivered returns of 21.5% and 19.3% respectively in sterling terms; however, their pound-denominated share classes have also performed strongly, with returns of 9.2% and 7.9%.

The top 10 performing investment companies since 31 January 2020

RankInvestment CompanyAIC sector% share price total return
31/01/2020 – 13/03/2020
Average investment company (ex. VCTs)Peer group weighted average-16.2
1BH Global USD Hedge Funds21.5
2BH Macro USDHedge Funds19.3
3Schiehallion Growth Capital10.9
4Ashmore Global Opportunities GBPGlobal Emerging Markets9.8
5BH Global GBPHedge Funds9.2
6Hadrian's Wall Secured InvestmentsDebt - Direct Lending8.4
7BH Macro GBPHedge Funds7.9
8Marble Point Loan Financing Debt - Structured Finance5.7
9US Solar FundRenewable Energy Infrastructure5.1
10Aquila European Renewables Income FundRenewable Energy Infrastructure4.7

Source: AIC/Morningstar. Performance is share price total return in sterling terms.

*Source for all data is AIC/Morningstar. Sector averages are weighted averages and are not produced for sectors with fewer than three constituent investment companies. Data is from 31/01/2020 – 13/03/2020. Performance is in sterling terms.

Annabel Brodie-Smith is communications director at the Association of Investment Companies

Further reading: Renewables and infrastructure attractive 2018 investment ops – Foresight

 

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