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Investment trust winners one year on

With a fresh coronavirus variant among us, the dreaded idea of another UK lockdown has been doing the rounds. Already reality in some countries, it's a prospect that could have important consequences for your investment returns and  Christmas.

As such, I enjoyed a recent Ideas Farm article in which Algy Hall discussed the “broken promises” of lockdown. As Algy notes, shares once riding high on their status as lockdown “winners”, from Zoom Video Communications (US:ZM) to Peloton (US:PTON), are well off their previous highs.

But what of former leaders in the fund space? If funds are mainly much less volatile than individual companies, we did see certain investment trust shares rocket ahead in 2020, prompting us to ask whether the time had come to take profits. Roughly a year on, we’re seeing some pretty mixed outcomes.

Let’s start with niche plays that nobody seems to love anymore. Shares in Biotech Growth Trust (BIOG) had fallen by around a quarter between the start of the year and 26 November, with Golden Prospect Precious Metals (GPM) down by almost a fifth. There seem to be good explanations for the poor performance. In the case of Biotech Growth Trust, a recently published half-year report put the reversal of fortunes down to a variety of factors, from a move away from growth stocks to the trust’s preference for small-cap stocks at a time when bigger names outperformed. The Golden Prospect board, for its parts, has acknowledged “gold’s inability to climb to higher ground” after a stellar 2020.

With China going from being a leading market in the lockdown era to a region now considered by some as uninvestable, it’s no surprise that Fidelity China Special Situations (FCSS) and JPMorgan China Growth & Income (JCGI) have had a rough year. With Japan also out of favour this year, JPMorgan Japanese Investment Trust (JFJ) has had its own problems.

Things perhaps get a little more interesting from here on. Last year the list of outperformers was crowded with trusts and open-ended funds managed by Baillie Gifford. It has been a more challenging year for these growth stalwarts, but with quite different results.

Shares in global small-cap trust Edinburgh Worldwide (EWI) were down by around 17 per cent between the start of 2021 and time of writing. While its biggest position, Tesla (US:TSLA), has again done extremely well, troubles at other top holdings such as Zillow (US:Z) have dented returns. Shares in stablemate Baillie Gifford US Growth Trust (USA) were up by a modest 2.9 per cent compared with a 25 per cent rise in the S&P 500.

Others have had a much better time. Scottish Mortgage Investment Trust (SMT) has held up well despite suffering because of the market rotation earlier this year and the crackdown in China, an area of focus for its managers.

In light of that crackdown, it's worth noting that Pacific Horizon Investment Trust (PHI) is also sitting on decent returns this year in contrast to many peers, in part thanks to what its board has described as "a significant, timely move in the portfolio weighting away from China, initially into commodities and subsequently towards India". Another 2020 winner, Allianz Technology Trust (ATT), has made respectable returns so far this year despite a shift in market winners, even if these gains are much lower than its stellar 2020 returns.