A recent note by Stifel got us thinking. The note posed a contrarian view about UK equity investment trusts, highlighting their positive recent performance and large discounts.
Among the trusts cited were Mercantile, Temple Bar, Edinburgh, Fidelity Special Values and Law Debenture - all of which have had strong performance over the past 12 months, according to Stifel
Now many portfolio managers don't hold investment trusts for a variety of reasons - sometimes it's to do with cost, sometimes it's to do with liquidity and sometimes it's a point of principle.
And unsurprisingly, the presence of the above listed trusts in our database is reflected in that. None of the trusts mentioned above are held by any of the allocators in our database.
But as many of our readers will know, in this day and age most investment trusts are run by managers who also run open-ended funds along very similar lines.
And indeed this proved to be the case here, as can be seen in the graph above. Without wanting to teach our readers to suck eggs: a correlation of one is perfect, so these vehicles are all very highly correlated.
So we thought we'd have a look at whether the open-ended funds in question had matched their trust equivalents for their strong performance over the past 12 months or so and indeed they had. Mostly.
All but one were in the top quartile of their sector over that time period. The odd one out is Janus Henderson UK Equity Income & Growth but then its sibling Law Debenture hasn't done especially well either in comparison to the FTSE All Share.
So are these funds any more popular than their trust counterparts within the Asset Allocator database? Well, it's a mixed bag.
Redwheel UK Equity Income is one of the most popular UK equity income funds - tied with Artemis Income. Only two funds - Man GLG Income and Evenlode Income - are more widely held.
Fidelity Special Situations also has a following - albeit a small one of only two allocators.
In the UK growth sector, allocators much prefer Lindsell Train UK Equity, Liontrust Special Situations and JOHCM UK Dynamic (though whether the last of these will lose out in the coming months is a different story).
The other three open-ended funds - JPM UK Equity Growth, Janus Henderson UK Income & Growth and Liontrust UK Equity - are held by none of the portfolio managers we cover.
Of course the middle of these has had more tepid performance than the first and third, and one of the attractions Stifel originally highlighted about the trusts - their large discount - will obviously not be a factor with any of these funds.
But perhaps there is food for thought for any allocator looking to freshen up their UK equity holdings.
