Ian Cowie: a ‘dismal’ start to the year but these four trusts still made money

Our columnist checks his returns for the first six month of the year and finds that just four out of his 20 investment trusts made money.

Europe’s worst war in more than 75 years and the latest variants of the coronavirus combined to shock global stock markets in the first six months of this year. Rising inflation and interest rates did nothing to allay investors’ fears.

No wonder some of the world’s biggest share price benchmarks got off to their worst first half-year for more than half a century, with the Standard & Poor’s 500 index falling 21% below its level at the start of 2022. Sad to say, your humble correspondent’s modest portfolio of investment trusts did not prove immune to these setbacks.

Only four out of my 20 investment trust shareholdings managed to deliver positive returns during the dismal first half of 2022. But, because I know that some of you enjoy my losers more than my winners, let’s report the rough before the smooth; the pain before the pleasure.

Schroder UK Public Private Trust (stock market ticker: SUPP), probably still best-remembered as Woodford Patient Capital, after originally being named after the former high-flying “star fund manager”, Neil Woodford, remains my stand-out stinker. This turned £1,000 into £639 in 2022 H1 and continues to disappoint hopes we might have seen the worst.

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The only reason I hang onto the rump of this rotten stock is to try to prevent me doing anything similarly stupid again. More positively, I have met several “star fund managers” over the years and the only thing they had in common was that they all made much more money than any of their punters. So at least SUPP shows that the pros don’t necessarily do any better than us amateurs.

Baillie Gifford Shin Nippon (BGS) was next worst, turning £1,000 into £643 in the first six months of this year. Small and medium-sized companies in the same country also produced its neighbour in this list of shame, JPMorgan Japan Small Cap Growth & Income (JSGI), which ended the period with £662.

Both suffered from fears of another false dawn in the Land of the Rising Sun, whose energy crisis will be compounded by the fact it has relatively little oil of its own. While BGS yields no dividends, JSGI pays 6.4% income, which at least provides a tangible reason to be patient.

Closer to home, European Assets (EAT), another smaller and medium-sized companies specialist, was the least bad of my top-line losers, ending the period with £681. Once again, an eye-stretching dividend yield of nearly 9.5% helps to ease the pain.

Turning to my winners, Gore Street Energy Storage (GSF), the industrial batteries specialist, finished fourth with £1,043, according to independent statisticians Morningstar. Pumping out almost 6.6% income electrified returns.

BlackRock Latin American (BRLA) danced into the sunshine after several years under a cloud with total returns of £1,072. Soaring commodity prices and a yield above 5.6% helped earn its bronze medal.

Second-place on the podium went to Ecofin Global Utilities & Infrastructure (EGL) which ended the first half with £1,079. Its portfolio of electricity and gas providers includes some of the world’s biggest renewable energy businesses. EGL’s apparently unremarkable 3.5% dividend yield has also grown by an eye-stretching annual average of nearly 33% over the last five years.

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Gold medal goes to a little-known regional specialist, the Gulf Investment Fund (GIF), with £1,174. Its main asset allocation is to Qatar, the small Arabian Gulf state that is the world’s biggest exporter of liquefied natural gas (LNG).

Since Russia’s invasion of Ukraine led Germany to block the opening of a new LNG pipeline, called Nord Stream 2, and Russia has retaliated by reducing the gas it pumps to Germany by 60%, I expect LNG prices to rise further. Investor awareness of Qatar may also increase when World Cup football kicks off there on November 21.

Nick Britton, head of intermediary communications at the AIC, told me: “It’s been a tough start to the year, with the average investment company losing 17% during the first six months.

“To put this in perspective, it is worse than the first half of 2020, when the average investment company lost 6%, and the first half of 2008, which saw the industry average down 11%. 

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“Most sectors delivered negative returns, with those focused on technology and growth struggling most. Equity income sectors, while not making money for investors, have weathered the storm much better, with Global Equity Income, for example, down just 3% over the six-month period.”

Put another way, “jam tomorrow” stocks seem to have had their day, leaving a sour taste in recent buyers’ mouths. Meanwhile, Mr Market is rediscovering the joys of a “bird in the hand” or dividend cheques that turn up on time.

Both trends have further to run but Downing Street drama and other domestic news should not distract investors from the importance of investing internationally to diminish risk by diversification.

Ian Cowie is a shareholder in Baillie Gifford Shin Nippon (BGS), BlackRock Latin American (BRLA), European Assets Trust (EAT), Ecofin Global Utilities & Infrastructure (EGL), Gulf Investment Fund (GIF), Gore Street Energy Fund (GSF), JPMorgan Japan Small Cap Growth & Income (JSGI) and Schroder UK Public Private (SUPP) as part of a globally-diversified portfolio of investment trusts and other shares.