The investment landscape in 2023 was filled with surprises, as some sectors soared to new heights while others faced significant challenges. Let's take a closer look at the best and worst-performing investment trusts of the year.
The Leaders: Technology and Aircraft Leasing Take the Crown
In 2023, the technology sector experienced a resurgence, fueled by the growing enthusiasm for artificial intelligence (AI). Tech giants such as Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, known as the 'Magnificent Seven,' led the charge and helped the sector recover from a disastrous 2022.
Among the best-performing investment trusts of 2023 were Polar Capital Technology Trust and Allianz Technology Trust. These trusts showcased impressive returns of 50.5% and 44.5% respectively. What sets these trusts apart is their substantial holdings in the US tech mega-caps, with six out of seven making up their top 10 holdings.
Another trust that capitalized on the AI rally was Manchester & London. This global equity trust benefited from its sizable positions in Microsoft and Nvidia, which accounted for 32.1% and 20.3% of the portfolio respectively.
Aircraft Leasing Rebounds
For the second year in a row, Nimrod Air Two and Amedeo Air Four Plus showcased their resilience as they made it to the list of the best-performing investment trusts. Specializing in aircraft leasing, these trusts reported returns of 48.2% and 30.4% respectively. Despite suffering during the Covid pandemic, they have been steadily recovering since the resumption of international travel.
Japan and India Shine
Japanese equities experienced a notable surge in 2023, with the local stock market reaching its highest level in 33 years. Nippon Active Value Fund, an activist investor, shone brightly with a remarkable return of 41.1%, securing its position among the best-performing investment trusts of the year. The trust's market capitalization of £306.4m as of January 2nd, 2024, reflects its successes, following the absorption of its competitors, abrdn Japan Investment Trust and the Atlantis Japan Growth Fund.
In India, the mid- and small-cap rally played to the advantage of India Capital Growth, specializing in this segment of the Indian stock market. The trust delivered a solid return of 34.1% in 2023, placing it among the top performers.
The Laggards: Troubles for Renewable Energy and Property Sectors
On the other end of the spectrum, investment trusts from the IT Renewable Energy Infrastructure sector struggled in 2023. Factors such as higher inflation, rising interest rates, concerns about energy security following the Russian invasion of Ukraine, and cost disclosure issues weighed on their performance. Ecofin U.S. Renewables Infrastructure Trust, US Solar, and HydrogenOne Capital Growth were among the trusts that faced challenges.
Similarly, several investment trusts within property-related sectors experienced a rough year. Regional REIT from the IT Property - UK Commercial sector, Schroder Ground Rents Income from the IT Property - UK Residential sector, and Longbow Senior Secured UK Property Debt Investments from the IT Property - Debt sector were among the underperformers.
Chinese equities also suffered in 2023, impacted by weak economic data, geopolitical tension, and the worsening crisis in the local property sector. JPMorgan China Growth & Income, in the IT China/Greater China sector, faced significant headwinds and found itself among the worst-performing investment trusts of the year.
The Bottom Spot: A Struggling Mining Trust
The worst-performing investment trust of 2023 was GRIT Investment Trust, which focuses on small- and mid-cap natural resources and mining companies. The trust reported a loss of £83,000 in the first half of the year. Despite these difficulties, the trust's chairman, Richard Lockwood, remains optimistic, stating that the economic challenges of the past six months have presented opportunities for the company's pursuit of a suitable reverse takeover target.
In conclusion, 2023 showcased a diverse range of investment trust performances. The technology sector and aircraft leasing strategies soared, while renewable energy, property sectors, and Chinese equities faced various challenges. As always, the investment landscape continues to evolve, presenting both opportunities and risks for investors.
Source: FE Analytics