Ian Cowie: how my ‘forever fund’ fared in final quarter of 2024

Considering the performance of my investment trusts during the fourth quarter of 2024, plus recent years, I can see that taking risks has been rewarded sometimes - and, less happily, punished on others. Lest that sound like a counsel of despair, let me say straightaway that it demonstrates the importance of building a diversified portfolio of different funds that don’t all go up or down at the same time.

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The laggards

Let’s start with the Q4 failures, because I know that some of you enjoy my losers more than my winners. Step forward BlackRock Latin American Ord (LSE:BRLA), which suffered a double-digit loss during the past three months, shrinking shareholders’ capital by -11%.

Yearly ongoing charges of 1.28% prompt the irritating thought that the managers are making more out of this investment trust than the shareholders. It destroyed -26% of our money over the past year, following a loss of -17% over five years and a modest gain of 31% over the decade, according to independent statisticians Morningstar.

The only positives are a dividend yield of 8.1%, which has risen by an annual average of 4.8% over the past five years. That explains why the shares are trading at a discount to net asset value (NAV) of “only” -12% and why I am hanging on in hope.

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Ecofin Global Utilities & Infra Ord (LSE:EGL) is my second-worst investment over the last quarter, ending the period -9% lower. Interest rates falling more slowly than expected and fears that greedy governments will squeeze utilities even harder, seem to be the main problems.

EGL does not have a 10-year track record as it was launched in September 2016. It has delivered total returns of 6%, 1.4% and 40.4% over the past year, three years and five years, including 4.7% dividend income, rising by 5% per annum. Once again, annual charges are high at 1.27% but a -16% discount - and the essential nature of the underlying services provided, such as electricity, gas and water - help me remain positive.

Greencoat UK Wind (LSE:UKW) was my third-worst trust with a 7% loss in Q4. It has been battered by the same headwinds as EGL with a loss of -4.9% over one year. Over five years, it is up 13.1%, but over 10 years it has returned 109.3%.

More positively, UKW generates 7.9% income rising by 8.1% per annum, which is an attractive combination you don’t find often. With relatively modest charges of 0.92% and shares priced 20% below NAV, this income-seeker intends to buy more.

The winners

Turning to the winners, Polar Capital Technology Ord (LSE:PCT) won bronze with a total return of 16% over the past three months. Nor was that a digital flash in the pan, with total returns of 36.6%, 125.2% and 538% over one, five and 10 years.

Less happily, while several of its biggest underlying holdings - including the tech giants Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT) - yield some dividends, PCT pays no income at all. But annual charges of 0.8% are cheaper than any of the losers mentioned above and its -13% discount is tempting.

JPMorgan US Smaller Companies Ord (LSE:JUSC) was my second-best investment trust in Q4. It delivered a total return of 17% as Mr Market began to speculate that American corporate tiddlers might catch up with bigger rivals, such as the “Magnificent Seven”.

Having predicted this several times in recent years, I am delighted to see it start to happen. I also suspect there might be more to come after Donald Trump becomes president on 20 January. Here and now, charges of 0.93% seem reasonable, although income of 0.6% is scarcely worth having and the shares are priced 3.7% above their NAV.

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Edinburgh Worldwide Ord (LSE:EWI) won Q4 with an eye-stretching total return of 25%. Excitement about its top holding, Space Exploration Technologies or Spacex, helped propel returns skywards to a total of 31% over the past year. As pointed out here before, this business and its 6,000 satellites has the potential to replace every internet services provider (ISP) on Earth.

Other topical top 10 assets include the drone-maker AeroVironment Inc (NASDAQ:AVAV) and the body camera-maker Axon Enterprise Inc (NASDAQ:AXON). But a barely visible return of 0.2% over five years, following 151.3% over the decade, demonstrate the extreme volatility and risks involved. There is no income and a negligible -0.6% discount, but charges of 0.7% look reassuringly cheap.

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Nick Britton, research director of the Association of Investment Companies (AIC), told me: “Q4 was defined by Trump’s decisive election win on 5 November, and a continuation of the trends we have been seeing all year.

“The AIC’s ‘Growth Capital’ sector has made a lot of investors happy with a 20% return, followed by the ‘Technology’ sector with 17%. 

“The sector that suffered most over the period was ‘Property – UK Logistics’, with a 15% loss, followed by Renewable Energy Infrastructure where the average trust lost 11%.”

Will 2025 see more of the same or a substantial change of direction? Nobody knows but a diversified portfolio of professionally managed investment trusts means I should have some exposure to growth and income wherever they arise. Merry Christmas!

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL); BlackRock Latin American (BRLA); Ecofin Global Utilities and Infrastructure (EGL); Edinburgh Worldwide (EWI); Greencoat UK Wind (UKW); JPMorgan US Smaller Companies (JUSC); Microsoft (MSFT) and Polar Capital Technology (PCT) as part of a globally diversified portfolio of investment trusts and other shares.