There’s been a resurgence in the popularity of investment trusts. Many new closed-end funds have sprung up on the market over the past few years, catering for the desire among investors to generate higher yields on their investments.
Unfortunately for growth investors, nothing on the same scale has happened for investment trusts seeking to deliver long-term capital growth. There are fewer funds for growth-focused investor to pick from… but I believe I’ve found two exciting ones.
China’s growth story
Fidelity China Special Situations (LSE: FCSS) is a fund which seeks to offer direct exposure to China’s growth story. But instead of just investing in a broad market index tracker, this fund uses an actively-managed strategy in an attempt to beat the market.
Fund manager Dave Nicholls reckons there may be better investment opportunities from buying companies which are set to benefit from China’s structural shift away from a reliance on investment towards consumption. This is because, going forward, many analysts reckon China’s middle class will be the main driver of economic growth, benefiting companies which directly deal with consumers.
As such, the fund has an outsized exposure to the consumer discretionary sector, with a weight of 31.5%, compared to the benchmark MSCI China Index’s weight of just 9.5%. Technology stocks also dominate the fund (as it also does for the benchmark), with its two biggest positions being Tencent (14.7%) and Alibaba (13.7%).
On the downside, unbalanced, actively-managed investment trusts can have their disadvantages too. Firstly, there’s no guarantee that a specific sector will continually outperform the market, leading to occasional bouts of underperformance against the market index. Additionally, excessive focus on some sectors could reduce diversification benefits, potentially leading to higher portfolio volatility and risk.
Technology stocks
For investors looking to increase their exposure to technology stocks, the Polar Capital Technology Trust (LSE: PCT) may be of greater interest. The fund aims to maximise capital growth for shareholders through investing in a diversified portfolio of technology companies around the world.
Despite the recent sell-off in tech stocks over the past week, I reckon the technology sector holds plenty of promise for investors. Reflecting the impact of technology disruption on traditional industries, technology stocks have the potential to generate significantly faster earnings growth than the broader market.
Large-caps
Large-caps, companies with a market capitalisation of more than $10bn, dominate the fund’s top holdings, accounting for just over 75% of its portfolio. The fund is geographically diversified, although because of the sheer disparity in the number of large technology companies in the US compared to the rest of the world, the fund is heavily exposed to the North American market. US & Canada stocks account for 66.8% of its portfolio’s value, with 10 out of its top 15 holdings coming from there.
Its top five holdings are Apple (7.5%), Alphabet (7.4%), Mircosoft (6.2%), Facebook (6.2%) and Samsung Electronics (3.8%).