Investment trusts have become increasingly popular for investors looking to generate stable returns. As closed-end funds that invest in diversified portfolios of assets, they can provide regular income streams and smoother performance over market cycles. When considering top global options, key factors include long-term track record, experienced management teams, and geographic reach. By evaluating metrics like dividends, discounts/premiums, and total returns, investors can identify well-managed trusts poised for continued success.
Long track records indicate reliable performance
The investment trusts with the most impressive long-term track records demonstrate an ability to navigate different market environments successfully. For example, Bankers Investment Trust has delivered 47 consecutive years of dividend growth, displaying resilience even during downturns. Similarly, Scottish Mortgage Investment Trust has produced exceptional total returns over 20+ years, leveraging a growth-focused approach. By favoring trusts with steady historical performance, investors gain greater confidence that positive results will continue into the future.
Skilled managers drive positive outcomes
Seasoned portfolio managers at the helm of investment trusts play a major role in generating advantageous investor outcomes. Top managers combine experience across market cycles with specialized expertise in their niches. For instance, James Anderson and Tom Slater have led Scottish Mortgage to become a high-performing tech-focused trust. Likewise, Alex Crooke and his team have produced excellent long-term returns at Janus Henderson managed trusts. When stellar managers stick with trusts for the long haul, their deep understanding informs ongoing success.
Global diversification reduces volatility
Investment trusts with globally diversified holdings offer exposure beyond single countries while moderating volatility. For example, Fundsmith Equity Fund holds multinationals like PayPal and Nestle to mitigate concentration risk. Monks Investment Trust also invests across sectors worldwide, historically showing lower volatility than market indexes. Blending geographical diversity and asset class variety produces more consistent returns during differing market environments. This enhances their appeal for investors prioritizing stable capital growth.
Solid discounts indicate undervaluation
Discounts and premiums between investment trust share prices and net asset values offer useful insights into current valuations. Trusts trading at substantial discounts are viewed as undervalued given the underlying assets held. For instance, Value and Income Trust currently has a 9% discount, suggesting it may represent a bargain opportunity. Evaluating discounts in conjunction with other metrics paints a clearer picture of trusts likely to outperform going forward due to investor mispricing.
By selecting investment trusts with veteran managers, diversified global portfolios, long-term outperformance, and advantageous discounts, investors position themselves to generate steady returns with muted volatility over market cycles.