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Questions of Trust

QUESTIONS OF TRUST
In: Portfolio Adviser, The Professionals’ Guide to Value Investing

James Carthew, Director, QuotedData

If you believe last November’s bounce in value stocks heralds the start of a renaissance for the strategy, who are the potential beneficiaries in the investment trust sector?

Last year turned out to be a bumper one for all forms of corporate activity within the investment trust sector, featuring as it did a number of liquidations, restructurings, mergers and manager changes, as well as some new issues.

One theme within this appeared to be a final capitulation on the use of value-style investing, which has underperformed growth-style investing for most of the period since the financial crisis, more than a decade ago. The Covid-19 pandemic was one of the triggers for this, as many of the sectors most impacted by the virus are heavily skewed to value stocks.

Among those arguably most affected by this trend has been Invesco’s stable of UK equity funds. Pressure had been building for a while after an extended period of poor performance. Edinburgh Investment Trust ended up being managed by James de Uphaugh at Majedie Asset Management; Perpetual Income & Growth has been merged with Murray Income Trust; Invesco Income Growth is being merged into Invesco Perpetual Select; and Keystone seems to be headed for archetypal growth manager Baillie Gifford, where it will become a ‘positive change’ fund.

In early November, when news emerged of a number of effective Covid-19 vaccines, we saw a sharp rally in value stocks, coupled with some profit-taking of positions in growth stocks. So, who was still around to benefit and which trusts should you back if you believe this heralds the start of a value renaissance?

The best-performing trusts over November were focused on value stocks and geared, by virtue of their capital structure and/or with bank debt. Chelverton UK Dividend Trust and Aberforth Split Level Income topped the performance table, in net asset value terms.

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