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Investors pile into 5% yielding HICL Infra on four-year low

Investors pile into 5% yielding HICL Infra on four-year low

Bargain hunters at Interactive Investor pounced on depressed shares in HICL Infrastructure (HICL) last month, pushing the former income stalwart into the top 10 of most popular investment trusts and companies on the share-dealing platform.

HICL shares had been off investors' buy-lists for a while, hit last September when Labour threatened to abolish private finance initiatives (PFI) from the NHS. A big investor in PFI contracts, HICL then suffered from the collapse of Carillion with the costs of replacing the contractor from its projects knocking £50 million, or 1.8%, from its net asset value (NAV).

With sentiment against the £2.7 billion portfolio damaged, HICL shares slid to a four-year low of 133.5p on 9 April at a discount of 9% below NAV. This was a far cry from the end of 2016 when after the Brexit vote upset, investors pushed the stock, a steady payer of inflation-linked dividends, to a 30% premium above NAV. 

Anyone who bought the shares at their post-referendum peak suffered a 27% fall before they bottomed out last month. Investors on Interactive Investor - and elsewhere - clearly spotted an opportunity and piled in, making the Guernsey-based investment company the seventh most bought closed-end fund on the platform in April.

Since then the shares have rallied nearly 6%, narrowing the discount to 3%. At 143.4p today they yield 5.5%.

Moira O’Neill, head of personal finance at Interactive Investor, said: ‘The trust, along with other trusts focused on infrastructure, went from trading at a premium to a discount over the past year, in part due to fears over what a Labour government could mean for public-private infrastructure contracts.

‘Whether or not that risk has receded is uncertain. However, its discount may have convinced many investors it is currently a bargain.’

Rank Top 10 investment trust purchases AIC Sector Change since March One-month share price return to 3 May Three-year share price return to 3 May
1 Scottish Mortgage IT Global -- 12.60% 86.10%
2 Baillie Gifford Shin Nippon Japanese Smaller Companies -- 1.70% 154.10%
3 City of London IT UK Equity Income 1 6.10% 20%
4 Woodford Patient Capital UK All Companies -1 -6.20% -29.50%
5 Allianz Technology Tech, Media & Telecomm -- 9.90% 111.40%
6 Monks Global 4 4.10% 82.50%
7 HICL Infrastructure Infrastructure new entry 7% 9.10%
8 Foreign & Colonial IT Global -1 6.10% 59.10%
9 Fidelity Japanese Values Japanese Smaller Companies new entry 5.40% 82.30%
10 Primary Health Properties Property Specialist new entry 4.50% 43.20%

Source: Interactive Investor

Other popular trusts

Scottish Mortgage (SMT), the £7 billion listed global fund managed by Baillie Gifford stock pickers James Anderson and Tom Slater, retained its spot as the most-bought investment trust on Interactive Investor in April – a month that saw its share price rise by 12.6%.

The Edinburgh-based group is currently finding favour with investors with two more trusts in Interactive's top 10: Baillie Gifford Shin Nippon (BGS), a top-performing Japanese smaller companies trust, ranked as the second most popular investment trust on the platform last month; Monks (MNKS), another of the group's global equity portfolios, moved up four places to sixth position.

City of London (CTY), a UK equity income trust managed by Job Curtis at Janus Henderson, edged one spot higher to third.

And similar to HICL, Woodford Patient Capital (WPCT), managed by Neil Woodford, retained its top 10 position during the month at number four, down from three in March. Investors are likely to have been attracted to its double-digit discount, which reached a low of 14% in March.

As April progressed, good news started to come in from a number of holdings. For example, Proton Partners successfully trialled groundbreaking proton beam therapy for cancer patients in the UK, and Benevolent AI completed a $115 million fundraising. 

However, in late April WPCT’s shares plunged after its third largest holding Prothena announced that it would cease research and development of a key drug for a rare disease called amyloidosis. 

Fundsmith leads the way on funds

Rank Top 10 open-ended investment companies ('funds') purchases   IA sector Change since March Total return 1m to 2 May (%) Total return 3 yr to 2 May (%)
1 Fundsmith Equity   Global -- 3.9 70.3
2 Lindsell Train Global Equity   Global 1 3 65.7
3 Legg Mason IF Japan Equity   Japan -1 -4.2 150.7
4 Vanguard LifeStrategy 80% Equity   Mixed Investment 40%-85% Shares -- 3.2 29.3
5 Baillie Gifford Japanese Smaller Companies   Japanese Smaller Companies -- 1.5 115.6
6 Marlborough UK Micro Cap Growth   UK Smaller Companies 10 4.5 77.9
7 Vanguard LifeStrategy 60% Equity   Mixed Investment 40%-85% Shares 4 2.2 23.6
8 Vanguard LifeStrategy 100% Equity   Global 2 4.3 35.2
9 Jupiter India   Specialist 6 3.9 41.6
10 Baillie Gifford Greater China   China -3 -0.02 63.3

Source: Interactive Investor

Private investors also poured money into open-ended funds managed by star managers Terry Smith and Nick Train, who are Citywire AAA-rated and AA-rated respectively.

Fundsmith Equity, managed by Smith, claimed top spot on Interactive Investor in April, followed by Lindsell Train Global Equity, managed by Train, AA-rated Michael Lindsell and AAA-rated James Bullock.

Legg Mason IF Japan Equity was the third most-bought fund, moving down from second in March.

The Vanguard LifeStrategy range dominated the top 10. These funds are baskets of cheap index-tracking funds, which hold a different proportion of shares - ranging from 20% to 100% - with the remainder in bonds and cash. 

LifeStrategy 80% Equity was the fourth most popular fund during the month. Meanwhile, the LifeStrategy Equity 60% and LifeStrategy Equity 100% were in seventh and eighth position.

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