10 investment trusts for your Isa

GROWTH

29. Stephen Peters, investment trust analyst, Charles Stanley:

BlackRock Frontiers Investment Trust (BRFI)

"This trust (an IC Top 100 Fund) trades at a small discount and offers exposure to fast-growing areas including the Middle East, Africa and Eastern Europe," says Mr Peters. "BlackRock Frontiers provides particular exposure to frontier market consumers. Some of the countries in these regions are rich in natural resources, and this feeds through to consumers. Qatar, meanwhile, has lots of natural gas and the wealth generated goes towards infrastructure spending. The fund also includes some exposure to mining and commodities.

"BlackRock Frontiers has performed exceptionally well over the past six months, outperforming the MSCI Frontier Markets Index, while it also pays a yield of nearly 2.5 per cent.

"Frontier markets are even less developed than emerging markets and are more illiquid, so you don't want flows in and out of a fund investing in this area. This is why an investment trust structure is well suited to this kind of investment.

BlackRock Frontiers has a good manager in Sam Vecht (read our interview with him) and BlackRock has a good infrastructure for investing in these regions. This is a good option for a long-term view."

30. Charles Cade, head of investment companies research, Numis Securities:

HgCapital Trust (HGT)

"The environment appears favourable for private equity, with mergers and acquisitions activity picking up," says Mr Cade. "HgCapital has an excellent track record, delivering net asset value (NAV) growth of 15 per cent a year over the past decade through a focus on quality growth companies. It invests primarily in mid-market buyouts in northern Europe, focused on the UK, Germany and the Nordic region. The portfolio continues to deliver double-digit sales and earnings growth, and is focused on market niches that can deliver sustainable growth in spite of tough economic conditions, for example accounting software. We anticipate further uplifts from realisations during 2013 and expect a significant increase in the dividend."

INCOME

31. Stephen Peters, investment trust analyst, Charles Stanley:

Neuberger Berman Global Floating Rate Income - £ (NBLS)

"Neuberger Berman Global Floating Rate is a good size with assets of more than £400m," says Mr Peters. "This invests in a global portfolio of senior secured corporate loans with selective use of senior bonds, diversified by both borrower and industry, and mainly denominated in US dollars. Because the loans are secured if the companies borrowing them go bust, the creditors have a claim over the assets to try to get their money back. These loans also rank above high-yield bonds in terms of who gets paid back first. The fund pays an attractive yield of 4.72 per cent and with exposure to bond coupon (interest) payments linked to Libor the fund aims to offer protection against rising interest rates."

32. Charles Cade, head of investment companies research, Numis Securities:

Schroder Oriental Income (SOI)

"Schroder Oriental Income offers a yield of 3.4 per cent as well as the potential for dividend growth by investing in equities in the Asia Pacific region," he says. "The fund benefits from a highly experienced manager, Matthew Dobbs, backed by Schroder's team of 28 analysts in Asia. He aims to take advantage of the domestic growth story in Asia through a bottom-up, stock-picking approach. The core of the portfolio is represented by quality companies with strong balance sheets and sustainable earnings. The fund has delivered NAV total returns of 14.4 per cent a year since launch in July 2005 versus 12.4 per cent for MSCI Asia Pacific ex Japan Index, and the dividend has grown by more than 5 per cent a year."

WEALTH PRESERVATION

33. Tom Tuite Dalton, analyst, Oriel Securities:

Murray International (MYI)

"This trust (an IC Top 100 Fund) has an excellent long-term record, outperforming most other funds over five years, and grows its dividends ahead of inflation," says Mr Tuite Dalton. "It has high overseas earnings exposure, is a large liquid fund and benefits from an experienced manager, Bruce Stout, who is supported by Aberdeen Asset Management's extensive global research resource."

34. Alan Brierley, director - investment companies, Canaccord Genuity:

Personal Assets Trust (PNL)

"The primary focus of this trust (an IC Top 100 Fund) remains capital preservation and the current portfolio composition is 44 per cent equity, 13 per cent gold bullion and 43 per cent liquidity," says Mr Brierley. "The exceptional relative gains during the financial crisis mean the five-year performance numbers are impressive. The company has now established itself as a mainstream investment option and since Sebastian Lyon assumed responsibility in March 2009 the number of shares has increased by 128 per cent, with the market capitalisation rising from £153m to £580m. The company has successfully operated a discount and premium control policy for several years and this has significantly reduced premium/discount volatility."

DIVERSIFICATION

35. Kieran Drake, analyst, Winterflood Securities:

BlueCrest AllBlue £ (BABS)

"This fund has delivered positive NAV performance in each of the calendar years since its launch," says Mr Drake. "The fund invests in six BlueCrest managed funds, with the aim of delivering good risk-adjusted returns with tight control of downside exposure. At 1 February the fund was allocated between six strategies and, in 2012, five out of the six delivered positive returns, with the strongest performance coming from the discretionary strategies.

"Fees are only charged at the underlying fund level (2 per cent management fees and 20 per cent performance fees with high water marks). On a look-through basis, the total expense ratio for the fund in 2011 was 2.74 per cent excluding performance fees.

"The fund has delivered solid performance and has a good record of protecting capital. BlueCrest AllBlue gives investors access to a diverse range of strategies with low correlation to each other. We continue to recommend this fund within the hedge fund sector and believe that, with the discount control mechanisms in place, the current discount of 3.75 per cent offers value."

36. Alan Brierley, director - investment companies, Canaccord Genuity:

Pantheon International Participations (PIN)

"We believe Pantheon International Participations is well placed to continue to deliver superior returns," says Mr Brierley. "We reported in October that its balance sheet is strong while an increasingly mature portfolio is now producing superior revenue/earnings growth and a healthy level of realisations. During 2012, the re-rating was by far the biggest contributor to a shareholder total return of 34 per cent, although given the underlying maturity profile we expect greater attribution from NAV growth moving forward. Despite undoubted potential to extend the strong gains of recent years, somewhat inexplicably the discount is more than 27 per cent. Our long-standing discount target is 15 per cent. The company has been actively buying its own shares in the past 15 months and we expect this to continue and give the re-rating added momentum."

CONTRARIAN BET

37. Tom Tuite Dalton, analyst, Oriel Securities:

Herald Investment Trust (HRI)

"Herald has a good long-term record but trades on a wide discount to NAV of more than 16 per cent having just released a mixed set of final results," says Mr Tuite Dalton. "Performance in 2012 was held back by disappointing returns from Imagination Technologies Group (IMG) and SDL (SDL), two of the largest holdings in the portfolio. But both of these holdings have contributed strongly to performance in previous years and we continue to rate the stock-picking ability of dedicated manager Katie Potts. Herald invests in smaller technology companies on a global basis, although much of the innovation has been in the UK and the fund has 65 per cent of its assets invested here."

38. Nick Sketch, senior investment director, Investec Wealth & Investment:

Invesco Perpetual UK Smaller Companies Investment Trust (IPU)

"This is a tricky one as there are few screaming bargains in mainstream areas and some unloved areas deserve to be cheap," says Mr Sketch. "High-quality mid-cap and smaller investment trusts look an interesting and largely forgotten area that probably has some catching up to do if the global economy continues its shaky recovery, but many have already re-rated. More importantly, some stocks in these areas have also re-rated so a focus on quality and value looks right.

"A year ago, that would probably have led to a recommendation to buy into this area via Aberforth Smaller Companies (ASL) or Henderson Smaller Companies (HSL), but their discounts have tightened sharply and could well be wider than they are today in a few years. This may make Invesco Perpetual UK Smaller Companies a slightly safer bet today, as it too has a high-quality portfolio but also offers a cash exit at NAV less costs in under five years' time, making its discount of around 16 per cent discount look like a pretty reliable opportunity."

On or around Invesco Perpetual UK Smaller Companies' annual general meeting in 2017 it will offer shareholders options which may include a continuation of their existing investment, a rollover into a similar or other investment vehicle, and or the provision of a cash exit at a price close to NAV.

Investment trust ideas for your Isa

Source: Morningstar as at 21 February 2013, *Winterflood as at 22 February 2013, ** AIC