11 alternative investment trusts to capture growth - Interactive Investor

Equity markets have come under pressure from inflation concerns and political unrest, with growth investors hit hard in January 2022 as markets priced in expected Federal Reserve interest rate rises, according to the article published by interactive investor. Against this backdrop, the investment trust analyst team at Peel Hunt compiled suggestions for growth-oriented investment trusts, defined as those yielding less than 3%, that invest in assets other than listed equities. Peel Hunt found that alternative trusts paying less than 3% were largely invested in private equity, and so it selected four contrasting private equity trusts.

HgCapital Trust (LSE:HGT) has a record of backing unlisted technology companies, with five-year annualised NAV total returns of 24%. It has traded at a premium since mid-2019 and remains on a small premium, though Peel Hunt suggests tech-sector volatility could present a buying opportunity. NB Private Equity Partners (LSE:NBPE), on a 21.4% discount as of 31 January, focuses on mega trends and long-term secular growth, with over 90% of its holdings unlisted and a 3% dividend. Peel Hunt expects both NAV appreciation and discount narrowing. HarbourVest Global Private Equity (LSE:HVPE) is a fund of funds with exposure to more than 10,000 underlying companies, has posted a yearly NAV total return of 19% over five years, and trades on a 19.7% discount. Augmentum Fintech (LSE:AUGM), a specialist in disruptive financial services, has interactive investor as its largest holding at 16% of NAV, and trades on a 3.9% discount. Peel Hunt anticipates multiple near-term NAV drivers from portfolio exits and realisations.

Peel Hunt also selected three Flexible sector wealth preservation trusts: Ruffer (LSE:RICA), Capital Gearing (LSE:CGT) and RIT Capital Partners (LSE:RCP). All hold diversified mixes including index-linked government bonds, gold and listed equities. Ruffer, on a 3.3% premium, has been hedging against rising interest rates and favouring value-oriented equities. Capital Gearing, also on a 3.3% premium, uses no short selling or gearing and has sought inflation protection through alternatives and property. RIT Capital Partners, on an 8.4% discount, uses funds, private equity, absolute return strategies and currencies, and Peel Hunt "sees value at these levels."

Winterflood analyst Shavar Halberstadt also favoured private equity, selecting ICG Enterprise Trust (LSE:ICGT) and Standard Life Private Equity (LSE:SLPE). ICG Enterprise has delivered 12 consecutive years of double-digit portfolio growth on a local currency basis, and Halberstadt considers its 18.7% discount "hard to justify." Standard Life Private Equity, which backs 'best in class' private equity managers in Europe and the US, trades on a 16.6% discount despite what the article describes as strong long-term growth prospects.

Andrew McHattie, publisher of the Investment Trust Newsletter, selected Baker Steel Resources (LSE:BSRT), which holds largely unlisted pre-IPO mining stakes and has over 20% gold exposure that may hedge against inflation, and which trades on a 24.7% discount despite weak share price performance over the past nine months. He also picked Chrysalis Investments (LSE:CHRY), a growth capital provider to fintech businesses, which trades on a 22.2% discount and is up 90.3% over three years. Discount and premium figures cited are as reported in the article and may have changed since publication.