Experts reveal their favourite investment trusts for an ISA
Tips for cautious, moderate and adventurous investors.
Time is running out for investors to fill their ISAs before the end of the tax year on 5 April. That means there is less than a month to use your £20,000 annual ISA allowance.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Despite the war in Iran and worrying headlines about financial markets, most investors have seen these situations before. It’s vital to keep investing as usual and remain calm and patient. Panic selling is never wise – you will not find experienced fund managers radically changing their plans or rushing into short-term decisions because of a conflict with a very uncertain duration and outcome. They know that they need to steer a steady ship and that means sticking to their long-term strategies.
Investment trusts have been in existence for over 155 years and have delivered strong long-term performance. They have benefits for income investors, as they can pay resilient and rising dividends for decades.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC)
“Investment trusts have been in existence for over 155 years and have delivered strong long-term performance. They have benefits for income investors, as they can pay resilient and rising dividends for decades. Trusts can also work well for high growth areas like emerging markets as their fund managers are able to take a long-term view of their portfolio.”
To help investors make the most of their ISA allowance before the end of the tax year, we asked a range of experts at the UK’s leading investment platforms to recommend their favoured investment trusts for cautious, moderate and adventurous investors.
Trusts for cautious investors
Kyle Caldwell, Funds and Investment Education Editor at interactive investor, said: “Three wealth preservation investment trusts that have consistently delivered in terms of protecting capital during periods of stock market weakness are Capital Gearing, Personal Assets and Ruffer Investment Company. Each has a low weighting to shares and plenty of defensive armoury, such as low-risk, inflation-linked bonds. Each offers a steady, defensive option for investors seeking long-term real returns with controlled risk.
“As ever investors need to do their homework and look under the bonnet to see how the defensive exposure differs – particularly the equity holdings, where the three trusts have less in common.”
Jason Hollands, Managing Director of Bestinvest, also likes Personal Assets Trust. He said: “For investors unsettled by geopolitical events and the debate around a potential AI bubble, Personal Assets Trust, managed by Sebastian Lyon and Charlotte Yonge of Troy Asset Management, stands out as a defensive option. Its long-standing emphasis is on delivering dependable returns but with a sharp focus on capital preservation.
“The managers take a multi-asset approach, blending blue-chip global equities with short-dated bonds, index-linked gilts and Treasury Inflation Protected Securities (TIPS) and gold. This diversified toolkit has historically helped dampen volatility and limit drawdowns in turbulent markets. It won’t shoot the lights out in a raging bull market, but for those prioritising resilience over excitement, it merits consideration.”
Emma Wall, Chief Investment Strategist at Hargreaves Lansdown, said: “I am sure I won’t be the only one, but Personal Assets Trust is my pick for cautious investors. Charlotte Yonge and Sebastian Lyon are tried and tested fund managers who deliver on their mandate of capital preservation and steady growth over time. The trust’s allocation to gold has been welcome in recent years, as has their focus on downside protection. The board also has a well-executed discount control mechanism.”
Trusts for moderate risk investors
Jason Hollands, Managing Director of Bestinvest, said: “Managed by Nick Purves and Ian Lance at Redwheel, Temple Bar Investment Trust takes a disciplined value approach to investing predominantly in UK equities. The team focuses on companies trading at meaningful discounts to their assessment of intrinsic worth, rather than simply low near-term earnings multiples. A strong emphasis on balance sheet resilience helps avoid value traps. The bias towards large and mid-sized financially robust dividend-paying companies combined with a strong value discipline makes this a relatively defensive way to access UK equities but with an excellent track record.”
Paul Angell, Head of Investment Research at AJ Bell, said: “City of London Investment Trust is all about giving investors a blend of income and growth. That’s appealing to investors of all ages. Younger investors may want to reinvest any dividends to enjoy the benefits of compounding, while older investors typically welcome regular dividends to help pay the bills.
“Key to City of London is a long history of raising the dividend, giving investors a growing income stream. While it invests in big companies on the UK market, a big chunk of earnings from these companies is generated elsewhere in the world. That gives City of London some built-in geographical diversification.”
Emma Wall, Chief Investment Strategist at Hargreaves Lansdown, also tips City of London Investment Trust. She said: “It is not sensible to hold a trust with a single region exposure without others to add diversification, but assuming an investor is looking to add to their portfolio this tax year, City of London is my pick. Manager Job Curtis is one of the most experienced UK equity income investors in the industry, running a dividend hero trust invested in quality cash-generative companies. Reinvest the dividends if you’re looking for growth.”
Kyle Caldwell, Funds and Investment Education Editor at interactive investor, picks Murray International Trust. He said: “Given global stock markets are becoming increasingly concentrated and there are growing fears of the AI theme potentially being overheated, I am looking more towards those investment trusts that use their full global remit in having a good chunk of exposure (around a third in total) to Asia Pacific and Latin America. Murray International ticks this box.
“The portfolio is very different from the wider market, which gives it plenty of opportunity to add value versus a global index fund or ETF. US exposure is only 30%, much lower than the MSCI World Index, which has an allocation of 70%. It has a yield of 3.5% and has demonstrated it is a consistent dividend payer with 21 consecutive years of dividend increases.”
Trusts for adventurous investors
Emma Wall, Chief Investment Strategist at Hargreaves Lansdown, suggests JPM Emerging Markets Growth & Income. She said: “This trust is managed by emerging markets veteran Austin Forey and John Citron and it is one of the best ways for investors to access the growth in developing economies. The managers benefit from a well resourced team of over 100 investment professionals across nine countries, giving them eyes in most corners of the market. We think this is invaluable given the vast range of countries, cultures and companies within their investable universe. Emerging markets are likely to be volatile – as we have seen in recent market activity – but over the long term this trust offers diversification and opportunities for growth.”
Jason Hollands, Managing Director of Bestinvest, recommends Templeton Emerging Markets Investment Trust. He said: “For long-term investors prepared to tolerate greater volatility in pursuit of opportunities in some of the fastest growing economies globally, Templeton Emerging Markets Investment Trust is a great option. Launched in 1989, well before China had joined the World Trade Organisation, this trust was a pioneer in emerging market investing and is still going strong today. Managers Chetan Sehgal and Andrew Ness take a patient, pragmatic approach, seeking companies with sustainable earnings power that they believe are mispriced. The portfolio is well diversified by stock, sector and geography.”
Paul Angell, Head of Investment Research at AJ Bell, likes Polar Capital Technology Trust. He said: “Technology is at the heart of businesses around the world and is central to improving productivity. Polar Capital Technology Trust seeks to stay one step ahead of the curve by backing companies leading innovation and shaping the future.
“The portfolio is big on semiconductor-related stocks, hardware, and electronic equipment, as well as a broad spread of names using technology to their advantage. It even has positions in construction-related companies whose goods and services are being used to help build the massive infrastructure needed to run AI.
“Software exposure was reduced in good time, ahead of the recent pullbacks on the latest AI model enhancements. The shares currently trade at 8% below the underlying value of their assets, meaning this is a way to buy into big names like Nvidia and Microsoft at a discount.”
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Notes to editors
- The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 275 members and the industry has total assets of approximately £270 billion.
- For more information about the AIC and investment trusts, visit the AIC’s website.
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