Top 10 most-popular investment trusts: July 2024

Investors are on the lookout for high levels of income and positioning themselves for the technology bull run to continue.

These are two of the trends evident in the most-bought investment trusts among interactive investor customers in July. The list is based on the number of buys in real time, as opposed to volume.

The new entrant in July, Henderson Far East Income (LSE:HFEL), is part of the trend of investors seeking high starting yields. It entered the table in ninth place. Other high-yielding trusts in the top 10 are NextEnergy Solar Fund (LSE:NESF) and Greencoat UK Wind (LSE:UKW).

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Investors should apply a healthy dose of scepticism towards high yields, as more often than not they are an indication that a share is out of favour. Therefore, it is crucial to delve into the dividend to assess whether the income on offer looks sustainable.

Among the things to consider are the strength of investment trusts’ revenue reserves. Under the investment trust structure, some income (up to 15% a year) can be squirrelled away and utilised when there’s an income shortfall from the trust’s underlying investments.

Henderson Far East Income has a yield of 10.7%. Morningstar data shows its revenue reserve figure – expressed in years – is 0.54. Its long-term performance has lagged peers, but steps have recently been taken to attempt to improve capital returns.

Dropping out of the top 10 in July was Renewables Infrastructure Group (LSE:TRIG).It had only brief stay in the top 10, having entered in June. 

However, it is clear that investors are eyeing the renewable energy infrastructure sector for opportunities, with Greencoat UK Wind and NextEnergy Solar keeping their places in the top 10.

Interest rate cuts could signal a change in fortunes for this sector, which has been hurt by rising rates, which cause discounts to widen to high levels.

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At the top of the table (first to fourth place), nothing has changed since last month. Topping the table once again is Scottish Mortgage (LSE:SMT). It invests in global businesses, including up to 30% in private companies, that are tapping into technological advancements. In a recent On The Money podcast episode, we examined whether Scottish Mortgage can sustain its recent return to form.

Over one year, its performance shows signs of a turnaround, up 18.1%, but over three years it remains in the red, down -34.8%. Among the reasons for the upturn in performance are technology shares performing well and a share buyback plan succeeding in narrowing the gap between the share price and the value of the trust’s investments, the NAV.

In second place is Greencoat UK Wind. In its half-year results (released on 24 July), the UK wind farm investor reiterated its 10p full-year dividend target. The investment trust aims to provide investors with a yearly dividend that increases in line with RPI inflation. This has been successfully achieved each year since the trust launched in 2013. Its dividend yield stands at 7%.

In third place is JPMorgan Global Growth & Income (LSE:JGGI). It has a total return approach in aiming to outperform the MSCI All Country World Index over the long term. It is “style neutral”, meaning it does not favour a particular category of stocks, such as value or growth. Over the past three and five years, its approach has paid off, despite a few high-growth tech stocks dominating global markets since the start of 2023.

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Also unchanged in fourth place is Alliance Trust (LSE:ATST). Last month, it was announced that Alliance Trust and Witan (LSE:WTAN) have proposed to join forces to create Alliance Witan, which would swell net assets to around £5 billion.

Alliance Witan intends to adopt Alliance Trust’s strategy of investing in external fund managers who pick 10 to 20 of their best stock ideas. Both Alliance Trust and Witan have multi-manager structures in which stock picking is outsourced. The merger is expected to mean Alliance Witan will be of sufficient size to enter the FTSE 100 index.

In fifth and sixth place, respectively,  are technology duo Polar Capital Technology (LSE:PCT) and Allianz Technology Trust (LSE:ATT).

Both trusts are dedicated technology investors, but they approach the market in subtly different ways. Polar Capital is more “benchmark aware”, meaning that it tends not to stray too far from what its technology stocks’ benchmark looks like and makes small overweight and underweight positions in an attempt to outperform.

Allianz Technology has built up larger stakes in smaller companies over the years compared to Polar Capital Technology. Fund manager Mike Seidenberg, who took over in the summer of 2022, moved to make the portfolio look more like the benchmark and focused on more financially secure companies as interest rates rose. As well as seeking to profit from companies exposed to the artificial intelligence (AI) theme, another key sector for the duo is cybersecurity.

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City of London  (LSE:CTY) is in seventh place. Managed by Job Curtis since 1991, it predominately invests in dividend-paying FTSE 100 firms. Curtis adopts a conservative approach by focusing on companies with good cash generation. City has raised its dividend for 57 years in a row, making it one of 10 investment trusts with a track record of more than 50 years of income increases. It has a market-beating dividend yield of 5%.

Also retaining its place in the top 10 is Pershing Square Holdings (LSE:PSH), in eighth position. It is a concentrated portfolio of US-listed stocks managed by high-profile investor Bill Ackman.

Finally, in 10th place is NextEnergy Solar Fund (LSE:NESF). In May, the board approved a 1% increase in the dividend target for its next financial year, ending 31 March 2025. If achieved, this would be NextEnergy Solar Fund’s 11th consecutive year of dividend growth. Its dividend yield is 10%.

Top 10 most-popular investment trusts in July 2024 

Source: FE Analytics. Performance data to 30 July 2024. Rankings are based on the number of “buys” during July 2024.