Just a handful of investment trusts have managed to generate positive returns in 2022 amidst soaring inflation, interest rate hikes, and geopolitical tension. The first half of the year was one of the worst openings in recent history, and even though sentiment has improved in recent weeks, progress has been challenging across the board.
In this article, we will take a closer look at how mainstream equity and flexible investment trusts are performing in 2022. Despite the market conditions, there are a few sectors that have shown resilience and delivered positive average returns for the year.
The Trusts with Positive Returns
Within the investment trust space, three peer groups have managed to show a positive average return for 2022: IT Latin America, IT Infrastructure Securities, and IT Commodities & Natural Resources. These trusts invest in assets widely considered to offer inflation protection, which is especially attractive given the current soaring inflation rates.
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According to FE Analytics, the worst average returns have come from the IT Growth Capital sector, where trusts invest in unquoted shares of early to maturing companies. IT European Smaller Companies, IT Global Smaller Companies, and IT China/Greater China have also experienced significant losses so far this year, with IT UK All Companies not far behind.
Standout Performers
When we delve into individual investment trusts, we find that only 41 out of the 219 trusts analyzed have managed to generate a positive return this year. The highest return among the mainstream AIC sectors has come from Riverstone Energy, showing an impressive 43.7% increase over the period.
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As an energy-focused trust, Riverstone Energy invests in the global energy industry across all sectors. Its holdings span oil & gas, midstream, and energy services in various regions, including the US, western Canada, Gulf of Mexico, Latin America, and Europe. The trust has benefited from the soaring prices of energy commodities due to supply bottlenecks and geopolitical tensions.
Looking at the top-performing investment trusts in 2022, many of the leaders have direct investments in energy and other commodities companies. These include BlackRock Energy & Resources Income, CQS Natural Resources Growth and Income, and trusts that focus on commodity-exporting countries like Qatar Gulf Investment Fund and BlackRock Latin American IT.
The Struggles
On the other end of the performance spectrum, JPMorgan Russian Securities has suffered the biggest loss. This can be attributed to Russia being sanctioned and frozen out of financial markets after the invasion of Ukraine.
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The majority of the performance table comprises trusts that invest in unquoted or small companies. Investors have been selling out of these trusts due to concerns about higher interest rates and the risk of an economic slowdown.
In conclusion, despite the challenging market conditions, select investment trusts have managed to deliver positive returns in 2022. While trust performance can be influenced by various factors, it is crucial for investors to carefully analyze the sectors and individual trusts to make informed investment decisions.
Note: The information and images used in this article are sourced from saigonintela.vn and FE Analytics.
