AJ Bell’s trusts for investors of all risk tolerances

A trust positioned for an inflation spike, a less volatile stablemate of Scottish Mortgage and a portfolio that has lagged the index by 20 percentage points this year are some of those that AJ Bell’s Ryan Hughes says are worth considering for the coming 12 months.

The head of investment research at AJ Bell recently said that cautious, balanced, adventurous and income investors should look at open-ended funds such as Fidelity Short Dated Corporate Bond, First Sentier Global Listed Infrastructure, ASI Global Smaller Companies and Jupiter Asian Income for 2022.

Here, we find out which investment trusts he is tipping for investors of different risk profiles over the next year.

Cautious investors: Personal Assets

For those with a cautious mindset, Hughes has picked Personal Assets for the third year running. Manager Sebastian Lyon of Troy has spent several years warning that ultra-loose monetary policy would lead to a spike in inflation – a situation which appears to be playing out at the moment.

With jittery equity markets and fears over inflation remaining elevated for a considerable period, the defensive positioning of this trust, and in particular its exposure to inflation-protecting assets such as gold and inflation linked bonds should sit well for the year ahead,” Hughes said.

Performance of trust vs sector and index over 5yrs

Source: FE Analytics

Like Lyon’s flagship Trojan fund, Personal Assets’ portfolio is built around a core allocation of quality equities such as Microsoft, Visa and Nestle with structural positions in gold, index-linked bonds and cash. Protecting investors’ capital is at the heart of the investment philosophy.

“As a result, the trust works well in providing investors with an instantly diversified portfolio and given the emphasis on capital protection should sit comfortably with cautious investors,” Hughes said.

Balanced investors: Monks

For balanced investors with an allocation to global equities as a mainstay of their portfolios, the head of investment research pointed to “a highly credible actively managed trust from the Baillie Gifford stable” – Monks.

Managed by Spencer Adair and Malcolm MacColl, the trust looks for growth stocks with above-average earnings growth – like many Baillie Gifford portfolios – but also pays a lot of attention to diversification of risk by having a relatively high number of holdings (currently around 120).

Performance of trust vs sector and index over 5yrs

Source: FE Analytics

“While slightly in the shadow of its illustrious Scottish Mortgage cousin, Monks is much more diversified and less volatile and therefore works well for balanced investors wanting global exposure,” Hughes said.

“Importantly, the trust still has the growth focus that Baillie Gifford is synonymous with but in a more controlled manner and still has exposure to the likes of Tesla, Alphabet and Microsoft as well as many other smaller positions too.”

Adventurous investors: Worldwide Healthcare

The pick for adventurous portfolios - Worldwide Healthcare Trust – has endured a tough 2021, underperforming its benchmark by around 20 percentage points because of an underweight to the big Covid pharma stocks and an overweight to life sciences, biotech and China.

As the chart below shows, the trust has outperformed its average peer over the past five years. Hughes said the trust now looks attractive after a period of significant underperformance and highlighted it as a diversified play on healthcare.

Performance of trust vs sector and index over 5yrs

Source: FE Analytics

“The bigger picture away from the immediate Covid winners’ story is how the rapid drug development of the past 18 months translates into revolutionary new treatments looking forwards,” he said.

“The trust’s managers, healthcare specialists OrbiMed, continue to find very attractive opportunities and the issues in China have created further buying opportunities. In addition, the trust has access to private markets and has been looking to invest in the unlisted space with circa 7% of the trust now here.”

Income seekers: Coupland Cardiff Japan Income & Growth

While dividends have faced strong headwinds over recent years, Hughes described Japan as “a shining example” of how to manage company balance sheets as many of its companies are sat on huge amounts of cash without incurring massive debts.

This is leading to strong dividend growth for investors in Japan, while income in other parts of the globe feels a lot more scarce. Investors wanting to capitalise on this might want to consider Coupland Cardiff Japan Income & Growth, Hughes said.

Performance of trust vs sector and index over 5yrs

Source: FE Analytics

“The Coupland Cardiff Japan Income & Growth trust has the highly experienced Richard Aston who previously led the Japan team at JP Morgan before joining CC a decade ago,” he explained.

“The trust is yielding 3% and impressively managed to grow this during the pandemic as the strength of Japanese companies came through.”