Investment trusts are one of the best instruments to help build your wealth. Even though trusts might be more expensive than index-tracking funds, they’re run by skilled managers, whose job it is to try to outperform the market.
Fidelity Special Values (LSE: FSV) is one such example. This trust is one of the market’s best performers. Since the beginning of the year, the shares have returned 24% excluding dividends. And even after this performance, Fidelity continues to trade at a discount to net asset value, which is around 261p (according to the most recently published net asset value report).
A focus on value
Fidelity is focused on value and the firm’s substantial weighting towards financial services businesses has helped it beat the market this year. The fund is not limited by nationality and has benefitted from the rally in US financial stocks during the past 12 months. Its current largest position is Citigroup at 5.7% of the portfolio, followed by UK dividend champion Royal Dutch Shell at 5.2%.
As well as the trust’s outperformance, the other attractive quality is its relatively low cost. With an annual management fee of 1.1%, the fund is at the top end of what I would call “appropriately priced,” but the returns achieved over the past five years more than justify the higher fee.
Since the end of 2014, Fidelity has delivered a total return for investors of 144%, outperforming its benchmark, the UK All Companies Index by nearly 100%. The index has returned 75% over the same period.
With a dividend yield of 1.8% as well, significantly more than the average rate on offer at high street bank savings accounts, Fidelity looks to me to be a great addition to my retirement portfolio.
International value
The British Empire Trust (LSE: BTEM) has a much broader mandate than Fidelity, and this is one of the reasons why the fund looks attractive to me.
British Empire is a global investor, looking for undervalued companies all over the world. Only 1% of its portfolio is allocated to UK equities. Some 32% is allocated to European stocks, 20% is allocated to North American equities, and the remainder to Asian and other international stocks. Over the past five years, the fund has produced a return of 79% for investors, outperforming the FTSE 100 by 38% over the period excluding dividends.
Despite these gains, the shares trade nearly 11% below British Empire’s net asset value of 805p.
Another positive about the trust is its low management fee. The fee is 0.9% per year, 0.2% below that of Fidelity, although the performance gap explains the difference (British Empire’s dividend yield is also lower at 1.6%). Still, for exposure to international markets, with a proven management team, it seems that you can’t go wrong with the Empire trust.
As a way to benefit from global growth and protect my portfolio from Brexit, this trust seems to me to be worthy of further investigation.
