Finsbury Growth & Income (FGT) fund manager Nick Train is hopeful the poorly-performing UK equity income trust has finally passed an “inflection” point after enjoying its best month under his stewardship.
The £834m investment trust saw net asset value (NAV) jump 12.6% in October with the shares returning 11.8%, well ahead of the 1.1% rise in the FTSE All-Share, its best level of outperformance since Train took charge in December 2000.
Rebounds in all five of Train’s digital stocks also pushed the 2.4%-yielder back into positive territory with NAV and the shares up 8.4% and 6.2% in the first 10 months of the year.
That made FGT the best-performing investment company in October, leading the 15 biggest risers of the month (see first table) as previously high-flying technology trusts featured among the biggest fallers as the Nasdaq US tech index slid 8% from its peak (see second table).
AI “losers” turn “winners”
Increasing scepticism about the profits that US “hyperscalers” will generate from their gargantuan spending on artificial intelligence (AI) led to a sharp rotation during the month that Andrew McHattie spoke about on QuotedData’s weekly show on Friday. This also followed a 5.5% slump in the Nasdaq last Thursday as investors caught up with the implications of last week’s US midterm elections which saw the Democrat party make sweeping gains at the expense of President Trump’s Republicans.
Quality growth equity funds like FGT and STS Global Healthcare (STS) benefited from a swing from tech, as did other trusts perceived as defensive, such as Polar Capital Global Healthcare (PCGH) and Ecofin Global Utilities & Infrastructure (EGL).
Train said key holdings London Stock Exchange Group, data analytics group RELX, credit scorer Experian, property portal Rightmove and accounting software provider Sage, which had been been regarded by the market as “AI losers” earlier this year, had advanced 16%-21%. That’s significant for a concentrated portfolio that has 61% of its assets in these stocks. The five either erased or sharply narrowed their losses for the year.
“One of our smartest clients said to me earlier in the summer, pretty much at the nadir of our recent performance: ‘If the Nasdaq zags at some point, your portfolio will almost certainly zig.’… Well, he was right,” Train said.
However, he denied FGT was therefore “simply a hedge against AI bullishness” saying RELX and LSEG had both published positive trading updates during the month. He highlighted LSEG’s boast that 95% of its top 200 customers used its AI services and when they signed up for licences ended up subscribing for more of its data.
“These facts stand as a counter-argument to the proposition that, say, Claude for Financial Services will disintermediate LSEG and an encouragement that its AI strategy is working and improving its growth potential,” said Train in reference to Anthropic’s app that was behind the sell-off in February.
| Investment company | Total shareholder return % | Premium (- discount) % |
| Finsbury Growth & Income (FGT) | 11.9 | -7.5 |
| Brown Advisory US Smaller Cos (BASC) | 5.6 | -4.7 |
| Tetragon Financial Group (TFG $) | 5.4 | -63 |
| Onward Opportunities (ONWD) | 5.2 | 3.2 |
| STS Global Income & Growth (STS) | 5.1 | -1.9 |
| Polar Capital Global Healthcare (PCGH) | 4.9 | 2 |
| Ecofin Global Utilities & Infrastructure (EGL) | 4.5 | 0.6 |
| UIL (UTL) | 4.4 | -27.4 |
| Schroder Real Estate (SREI) | 4.4 | -33.6 |
| Neuberger Private Equity Partners (NBPE) | 4.1 | -26.2 |
| Oakley Capital Investments (OCI) | 3.8 | -31.5 |
| Alternative Income REIT (AIRE) | 3.8 | -15.3 |
| Baillie Gifford UK Growth (BGUK) | 3.7 | -9.6 |
| Edinburgh (EDIN) | 3.6 | -8.1 |
| Aberforth Smaller Companies (ASL) | 3.4 | -9.7 |
Source: QuotedData
Other healthy risers
Polar Capital Global Healthcare (PCGH) was one of only three trusts to end the month with shares standing on a small premium above NAV, in its case at 2%.
The £493m investment trust, managed by James Douglas and Gareth Powell at Polar Capital, rose 4.9% in October, ranking it sixth in our table. This took its total return over five years to 61%, beating the 40% from its benchmark, the MSCI World Health Care index.
Last year, as part of a second restructuring since launch in 2015, PCGH removed its fixed-life structure with an opportunity for investors to exit every five years with a tender offer.
Other gainers last month were Brown Advisory US Smaller Companies (BASC), up 5.6% after agreeing to merge with JPMorgan US Smaller companies (JUSC).
Tetragon Financial Group (TFG) followed just behind with a 5.4% gain after the announcement late last month of a $50m share buyback helped slightly narrow the hedge fund group’s enormous 63% discount to NAV.
Onward Opportunities (ONWD) was again the top riser of UK equity trusts, up 5.2% on a 3% premium. That takes the £59m small-cap fund, run by Laurence Hulse at Dowgate Wealth, to a 37% total return in just six months.
| Investment company | Total shareholder return % | Premium (- discount) % |
| Golden Prospect Precious Metals (GPM) | -17.4 | -4.6 |
| Polar Capital Technology | -15.2 | -8.4 |
| Baker Steel Resources (BSRT) | -15 | -31 |
| Geiger Counter (GCL) | -14.6 | -3.3 |
| Allianz Technology (ATT) | -14.5 | -8 |
| Home REIT (HOME) | -14.1 | -54.7 |
| Fidelity Emerging Markets (FEML) | -14 | -6.5 |
| Pacific Horizon (PHI) | -13.7 | -9.6 |
| JPMorgan China Growth & Income (JCGI) | -13.6 | -8.7 |
| Crystal Amber (CRS) | -12.8 | -60.4 |
| JPMorgan Asia Growth & Income (JAGI) | -12.8 | -4.2 |
| Manchester & London (MNL) | -12.6 | -27 |
| BlackRock World Mining (BRWM) | -12.3 | -2 |
| Schroder Asian Total Return (ATR) | -12.3 | -6.5 |
| Fidelity China Special Situations (FCSS) | -11.7 | -6.8 |
Source: QuotedData
Miners, Asia and tech trusts fall
As Andrew McHattie observed on Friday, fears of a slowdown in AI spending would hit global economic growth saw buoyant trusts in the mining, emerging markets and Asia sectors, beat a retreat alongside technology.
Golden Prospect Precious Metals (GPM) was the biggest faller, sliding 17.4% as the £74m investment company formally moved to Baker Steel Capital Managers from CQS Manulife. That perhaps shouldn’t worry investors too much as the shares have soared 257% in the past three years.
