Global investment entities capitalize on earnings from niche, international markets with unconventional profiles.
Investment trusts, a long-standing financial tool with a history spanning over 150 years, have demonstrated resilience in navigating various geopolitical and economic crises. This structure, exclusively chosen by Unicorn Mastertrust to deliver attractive total returns primarily through capital growth, is believed to be the key to long-term investment success.
Despite short-term challenges posed by recent political developments, such as the turbulence caused by Donald Trump's Liberation Day, the confidence in investment companies' ability to continue serving investors well is unwavering. This conviction stems from the firm belief that an investment trust offers the optimal structure for long-term investment success.
The Unicorn Mastertrust portfolio exhibits a structural bias towards trusts that use their semi-permanent capital to invest in globally diverse, relatively illiquid assets. This inclination offers significant exposure to smaller companies, listed private equity trusts, and specialized trusts suitable for a properly diversified portfolio.
As part of the first category, the Aberforth Smaller Companies Trust (LSE: ASL) stands out as the largest trust of its kind. Not only is it the largest in its category, but it also employs a value-investing approach consistently since its inception in 1990. This approach underperformed during the low-interest rate period following the global financial crisis and was further hampered by the Brexit vote and the subsequent shift of capital towards the American growth story. However, the portfolio, consisting of around 80 UK smaller companies, has since begun to reap benefits as the fundamental ratings of ASL's investments became undervalued, attracting corporate buyers and resulting in a surge in mergers and acquisitions.
The ICG Enterprise Trust (LSE: ICGT), another LPE trust, invests in buyouts in North America and Europe. Historically, these investments in private companies would be realized or refinanced within five to seven years. However, sales have been scarce over the last couple of years, casting doubt on the validity of LPE trust valuations. As a result, ICGT's net asset value (NAV) has expanded at a compound annual growth rate (CAGR) of 13.8%, while the share price’s CAGR has been lower at 8.5%, with the discount to NAV reaching a substantial 37%. To address this discrepancy, the managers recently announced the sale of around 5% of the portfolio at a level that validated the NAV and provided capital for new investments and share buybacks.
Lastly, the specialist trust category includes the Gold Prospect Precious Metals fund (LSE: GPM), which focuses on gold and precious metals companies. Given the volatile nature of gold prices and the potential for tariff-driven stagflation, GPM presents a high-risk investment opportunity. If these fears prove correct and inflows continue into physical exchange-traded funds, GPM may become an intriguing choice for investors.
- In spite of recent political turbulence, such as Donald Trump's Liberation Day, investor confidence in investment trusts remains solid, given their ability to deliver long-term investment success.
- The Aberforth Smaller Companies Trust (LSE: ASL), the largest trust in its category, employs a value-investing approach, and, with around 80 UK smaller companies in its portfolio, it has started to reap benefits as the fundamental ratings of its investments have become undervalued.
- The ICG Enterprise Trust (LSE: ICGT), another LPE trust, invests in buyouts in North America and Europe, and, despite a decline in sales over the past few years, the managers have announced the sale of a portion of the portfolio to address the discrepancy between the net asset value and the share price.
- For investors seeking high-risk opportunities, the Gold Prospect Precious Metals fund (LSE: GPM), a specialist trust focusing on gold and precious metals companies, might become an intriguing choice given the volatile nature of gold prices and the potential for tariff-driven stagflation.
