James Carthew: Software sell-off sparks divergence in UK trusts
The AI-driven sell-off has exposed structural differences among UK trusts, highlighting the need for diversification.
I’ve been considering increasing my exposure to UK equities in recent weeks, all while many trusts in the sector are feeling the impact of a selloff in software and data stocks linked to agentic AI.
The damage this has done to Finsbury Growth and Income‘s (FGT) already poor track record is substantial. Looking at the one-year net asset value (NAV) return figures for all UK trusts, there is now a 58 percentage point gap between FGT at the bottom on a 21.3% loss and Lowland (LWI) at a 37.7% gain.
FGT is also the only UK equity income trust to have lost money over the past five years, although a few small-cap trusts that follow a similar quality-driven approach also fall into that camp.
Another trust caught up in the selloff was HgCapital (HGT), whose private equity portfolio is even more concentrated in software and data businesses than FGT’s. Its largest holding – accounting and HR software business VISMA at 12.1% of the portfolio – has been forced to postpone its planned IPO until later this year.
Some of the stocks that have weighed heavily on FGT – such as Sage, London Stock Exchange, RELX, and Rightmove – also feature in Edinburgh’s (EDIN) large-cap biased portfolio.
Mercantile (MRC) has no exposure to these names due to its mid and small-cap focus, but it was not immune. Top 10 holding…. read more here