Ian Cowie: how my investment trusts fared in final stages of 2022

Our columnist runs through winners and losers among the 19 investment trusts he holds in his ‘forever fund’ for the final quarter of the year. 

What a year 2022 was, with Europe’s worst war since 1945 and most stock markets delivering their lowest returns since the global financial crisis of 2008. Sad to say, your humble correspondent suffered alongside most other shareholders with only six of my 19 investment trusts achieving a profit during the last calendar year.

Clutching at straws, perhaps, but at least things picked up in the fourth quarter (Q4) when the number of my investment trusts producing profits increased to nine. Meanwhile, difficult markets delivered important lessons to take forward into 2023.

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The laggards in the final three months of 2022

But let’s start with my losers and put pain before pleasure, because I know that some of you enjoy that kind of thing. Step forward Gulf Investment Fund Ord (LSE:GIF), which did worst among my investment trusts during Q4 by shrinking £1,000 at the start of October to just £902 by 22 December.

To be candid, this is as surprising as it is disappointing because Qatar is GIF’s main geographical allocation and has benefited from soaring demand for liquefied natural gas (LNG), since Russia’s invasion of Ukraine on 24 February squeezed global supplies. By contrast, GIF was also my top-performing investment trust over the whole year, growing the same original investment into £1,140 during calendar 2022.

The explanation is that GIF surfed the wave of rising energy prices after February but also fell into the trough that followed more recently. However, I note it remains the top performer in the Association of Investment Companies (AIC) ‘Global Emerging Markets’ sector over the last decade, five and one-year periods - a remarkable hat-trick - and continues to yield nearly 3.7% dividend income. I have no intention of selling any.

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Next worst over the last quarter, less surprisingly, was Polar Capital Technology Ord (LSE:PCT), with a total return of £913. As discussed here before, ‘jam tomorrow’ stocks that pay low or no income have fallen from favour since inflation and interest rates began to rise faster and further than expected last year. Once again, I have not sold any PCT.

Third-worst during Q4 was a former favourite, Vietnam Enterprise Ord (LSE:VEIL), which fell to £920. Due to its complete absence of dividends, I sold the lot and reinvested the money in VinaCapital Vietnam Opp Fund (LSE:VOF), which also suffered shrinkage to £953 during the last three months, but at least provides the comfort of 3% dividend income to pay me to be patient.

Taylor Maritime Investments (LSE:TMI), the ship leasing specialist, was also underwater, ending Q4 with £936. Feeling foolish about chasing past performance when I invested in August, I sold the lot to fund purchases elsewhere.

Reasons to be cheerful

On a brighter note, European Assets (LSE:EAT), the continental smaller companies specialist, did best in Q4 with a total return of £1,141. This shows how a long-term underperformer can surprise on the upside, just when I was on the verge of giving up hope. Once again, lip-smacking dividends kept me hanging on at EAT and, even after its recent bounce, it still yields an eye-stretching 9.8% income.

International Biotechnology (LSE:IBT) also bounced back from a low base to finish the quarter with £1,094 and yields a handy 4.3% income. Canadian General Investments (LSE:CGI) was not far behind with an end value of £1,090 and 2.3% dividends.

JPMorgan US Smaller Companies (LSE:JUSC) came fourth in Q4 with £1,079 and a negligible 0.6% yield. Meanwhile, Tufton Oceanic Assets (LSE:SHIP), another marine leasing specialist, where I should have kept all the money that briefly went into TMI, sailed in fifth with £1,059 and a dividend yield just a shade below 7%.

To put all this into perspective, Nick Britton, head of intermediary communications at the AIC, told me: “The fourth quarter of the year has been the best one, with the average investment company returning £1,035 for every £1,000 invested. It’s also the only quarter of the year to have seen a positive return.

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“UK equities have powered back over the past three months, with a 16.5% return for the UK All Companies sector and 13.8% for UK Smaller Companies. European Smaller Companies has also done well with 15.8% and so has Commodities and Natural Resources with 15.3%, one of the year’s standout performers.

“Meanwhile, the property sectors have struggled, with UK commercial property REITs down an average 4.6% as we await official confirmation that we have entered recession. Technology & Media has had a punishing year and the last quarter was no exception, with the average investment company in the sector making a 6.9% loss.”

Sometimes a share that has been last over one period will be first over the next. For much the same reason, the best time to buy is often when we least feel like doing so - because that’s when confidence and prices will be low. So a positive interpretation of negative returns last year is that today’s low prices might provide the basis of high profits tomorrow.

The most valuable lesson of 2022 for this investor is that it reminded me about the importance of maintaining a diversified portfolio. This includes exposure to sectors that are suffering short-term problems, but which might still yield medium to long-term growth and income.

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

Ian Cowie is a shareholder in European Assets Trust (EAT), Canada General Investments (CGI), Gulf Investment Fund (GIF),  International Biotechnology Trust (IBT), JPMorgan US Smaller Companies (JUSC), Polar Capital Technology (PCT), Tufton Oceanic Assets (SHIP) and VinaCapital Vietnam Opportunities Fund (VOF) as part of a globally diversified portfolio of investment trusts and other shares.