Ian Cowie: winners and losers in my ‘forever fund’ in the third quarter

Our columnist reports on performance over the past three months, a period during which two investment trusts have exited his portfolio. 

What a terrible year 2022 has been so far for stock market investors, and the third quarter was no exception. Sad to say, neither was your humble correspondent spared from financial pain, with no fewer than nine of my investment trust shares shrinking in value during the three-month period to the end of September.

On a brighter note, 11 of my investment trusts managed to make money during the same three-month period when the average member of the Association of Investment Companies (AIC) suffered a negative total return of -3%.

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To put all this in context, the MSCI World Index, a benchmark for global equities, fell by 5% during the third quarter and ended that period nearly a quarter lower than it began the year; 24% down. Rising inflation and interest rates, war in Europe and a “little turbulence” closer to home after the ‘Kama-Kwasi’ mini-budget provided slender support for share prices.

Coming down from the clouds of geopolitics and macroeconomics, this small shareholder’s experience during 2022 shows how difficult times demonstrate the importance of diversification or investing internationally. So, without further ado, let’s start with the losers.

The biggest fallers

Schroder UK Public Private Trust (LSE:SUPP) was the standout stinker again in third quarter, turning £1,000 on 1 July into just £759 by the end of September, according to Morningstar. SUPP, which is probably still better-known as Woodford Patient Capital, serves as a reminder that just because investors may hope things can’t possibly get any worse they might still do so.

The latest bad news from Schroders boiled down to an administrative error which apparently caused one of SUPP’s underlying assets, listed on the Amsterdam Stock Exchange, to be incorrectly valued for several months. This long-suffering shareholder can only ask when Amsterdam became part of the UK and what are these guys smoking?

European Assets Ord (LSE:EAT) was my second-biggest loser in the third quarter, turning £1,000 into £905. To be candid, I don’t blame the managers - Sam Cosh and Lucy Morris of Columbia Threadneedle - because EAT’s medium-sized and smaller companies focus is inevitably an uncomfortable theme at a time when war is raging on the continent.

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Tufton Oceanic Assets Ord (LSE:SHIP), the commercial ship leasing specialist, was third worst, finishing with £913 on the same basis as above, when cargo rates fell back on fears of global recession. Like EAT’s eye-stretching 10.8% yield, SHIP’s 7.2% dividend income pays me to be patient.

Other losers include JPMorgan Mid Cap Ord (LSE:JMF), which ended the three-month period with £920 and was sold in its entirety to raise cash last month; Gore Street Energy Storage Fund Ord (LSE:GSF) (£933); Canadian General Investments Ord (TSE:CGI) (£935); Vietnam Enterprise Ord (LSE:VEIL) (£941); US Solar Fund Ord (LSE:USF) (£956); and Northern 2 VCT Ord (LSE:NTV) (£969).

Taylor Maritime Investments Ord (LSE:TMI) also lost money during the third quarter, but as I did not buy these shares until August, I am not going to worry about that yet.

The biggest risers

More positively, India Capital Growth Ord (LSE:IGC), managed by Tridib Pathak and Gaurav Narain at Ocean Dial Asset Management, led my winners, turning £1,000 into £1,276 during the third quarter. My very first 10-bagger, JPMorgan Indian Ord (LSE:JII), came second during the same period with £1,109.

As discussed here before, the world’s biggest democracy has demographic and economic advantages over some regional neighbours that might prove important for investors. These include a younger population than China and export trade being displaced from the latter toward India, as tensions rise between America and China.

Baillie Gifford Shin Nippon Ord (LSE:BGS) (BGS), a Japanese smaller companies specialist from the out-of-favour fund manager, bags bronze medal with a total return of £1,089.

My other winners were BlackRock Latin American Ord (LSE:BRLA), with £1,080; Gulf Investment Fund Ord (LSE:GIF) (£1,077); JPMorgan Japan Small Cap Growth & Income (LSE:JSGI) (£1,060) - which was also sold in its entirety to raise cash in August; Worldwide Healthcare Ord (LSE:WWH) (£1,057); JPMorgan US Smaller Companies Ord (LSE:JUSC) (£1,045); Ecofin Global Utilities & Infrastructure Ord (LSE:EGL) (£1,042); Polar Capital Technology Ord (LSE:PCT) (£1,033) and International Biotechnology Ord (LSE:IBT)t (£1,019).

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Phew! Nick Britton, head of intermediary communications at the AIC, told me: “It’s been a quarter that’s seemed to last much longer than three months, from England winning the Women’s Euros in July to the mini-budget in September.

“We have a new prime minister and a new monarch, but sadly there was no turnaround in markets during the third quarter. That said, it was the best quarter so far in 2022 for investment company performance and some sectors bucked the negative trend.”

Investment trusts make it convenient and cost-effective to spread our money across a wide variety of companies, countries and currencies. It baffles me that so many investors fail to do so - especially since the pound recently hit a record low against the dollar.

The Bank of England’s emergency intervention steadied sterling’s exchange rate but it remains to be seen what will happen when this £65 billion bond-buying exercise is due to end on Friday week, 14 October. I intend to continue investing internationally via tried-and-tested closed-end funds.

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

Ian Cowie is a shareholder in Baillie Gifford Shin Nippon (BGS), BlackRock Latin American (BRLA), Canadian General Investments (CGI), Ecofin Global Utilities & Infrastructure (EGL); European Assets Trust (EAT), Gore Street Energy Storage (GSF); Gulf Investment Fund (GIF); India Capital Growth (IGC); International Biotechnology Trust (IBT); JPMorgan Indian (JII); JPMorgan US Smaller Companies (JUSC); Northern 2 VCT (NTV); Polar Capital Technology (PCT); Schroder UK Public Private (SUPP); Taylor Maritime Investments (TMIP); Tufton Oceanic Assets (SHIP); US Solar Fund (USFP); Vietnam Enterprise Investments (VEIL) and Worldwide Healthcare (WWH) as part of a globally diversified portfolio of investment trusts and other shares.