We all know that to retire early, you need to invest wisely for the future. With this in mind, I’m taking a look at two growth-focused investment trusts which could help you to build wealth over the long haul.

Neil Woodford

The Woodford Patient Capital Trust (LSE: WPCT) consistently ranks as one of the most popular investment trusts. It’s run by Neil Woodford, one of the UK’s best-known fund managers, and aims to invest in a mix of exciting, disruptive early-stage and early-growth companies, together with some of his high conviction mid- and large-cap ideas.

The fund specialises in investing young companies with strong intellectual property propositions, helping them fulfil their growth potential through the deployment of long-term patient capital.

It has in place an innovative fee structure that combines a very low annual management fee of 0.19% with a 15% performance fee on any excess NAV returns over a 10% cumulative hurdle rate per annum, which is subject to a high water mark. This structure aligns the interests of the fund manager with those of its shareholders and makes it a compelling fund pick for anyone looking to invest for the long haul.

Past performance

However, one major cause for concern for prospective investors is the fund’s dismal past performance. Since its inception in April 2015, it has delivered a total net asset value (NAV) loss of 16%, against the FTSE All-Share Index’s gain of 45% over the same period.

It’s still too early to tell whether its recent underperformance is a sign of things to come, given that the fund has had just over three years of operation — but certainly it has made a number of poor stock picks. Woodford suffered some high-profile losses from his biotech bets in Abaco Capital and Circassia, which more than offset gains from winning investments such as Purplebricks.

And following its recent underperformance, shares in the Woodford Patient Capital Trust currently trade at an 11% discount to its NAV.

Small-cap fund

An alternative trust for investors seeking exciting growth potential from innovative companies is the BlackRock Smaller Companies Trust (LSE: BRSC).

The fund’s recent performance is great, with it having delivered a total NAV return of 15% over the past year, against its benchmark performance of just 5%. This demonstrated the good stock selection made by its fund managers over the past year, with the fund benefiting from its exposure to pharmaceutical, biotechnology, financial and support service stocks.

The most significant contributors to its performance over the past year were Dechra Pharmaceuticals, Keywords Studios, Robert Walters, and Premier Asset Management.

Track record

Its longer-term track record is just as impressive, the fund having achieved very significant outperformance against its benchmark. In the 10 years to 28 February, the fund has delivered a total NAV return of 264%, against the benchmark’s gain of just 67%.

What’s more, BlackRock Smaller Companies Trust has a strong track record of growing its dividend, with 15 years of consecutive annual dividend increases under its belt.

Looking forward, however, I’m wary about the impact of uncertainty surrounding the UK economy, not least because of Brexit, given its heavy exposure to domestically-focused companies. And following recent strong interest in the fund, shares in it trade at a post-Brexit vote low discount to its NAV of just 8%.

The post Can the Woodford Patient Capital Trust help you to retire early? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any of the shares mentioned. The Motley Fool UK has recommended Keywords Studios. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Smaller companies

One such fund is the BlackRock Smaller Companies Trust (LSE: BRSC), which currently trades at a 12% discount to its net asset value of 1,534p per share. UK smaller companies have fallen out of favour with investors for quite some time, with many investment trusts covering the sector trading at some of the widest discounts to their net asset values (NAV) in the industry.

But despite uncertainty surrounding the UK economy, not least because of Brexit, the performances of smaller company investment trusts have held up well in recent years. The BlackRock Smaller Companies Trust is a particularly strong performer, with a five-year NAV return of 140%, compared to its Numis Smaller Companies plus AIM (ex Investment Companies) return of just 68% over the same period.

Growth and income

The fund aims to achieve long-term capital growth for shareholders, but it also provides income to shareholders via its twice-yearly dividend, which currently gives shares in the trust a yield of 1.8%.

Fund manager Mike Prentis, who has been the lead manager of the investment trust since 2002, doesn’t think like your average stock picker. Prentis has a preference for the fastest growing, innovative companies and takes a long-term view on fundamentals. He also uses a highly diversified investment strategy, with no single holding accounting for more than 2.5% of the portfolio value.

Industrials dominate its portfolio, with a 33% sector weighting, and this is followed by financial services (15.8%) and consumer services (13.1%). Top holdings include Dechra Pharmaceuticals (2.1%), Avon Rubber (1.8%), 4imprint Group (1.7%), Robert Walters (1.6%) and Central Asia Metals (1.6%).

Asia

Another fund that’s worth a closer look is Symphony International Holdings (LSE: SIHL). The Asia-focused investment company offers exposure to the region’s rapidly expanding markets by investing in firms that are set to benefit from the rising disposable incomes of the region’s growing middle class.

Macroeconomic fundamentals are supportive and valuations are attractive, with Asian stocks expected to benefit from strong economic growth and structural reforms in various countries. Many analysts also reckon Asian equities are only still mid-cycle in their bull market, meaning there’s potential for outperformance against developed market equities this year.

What’s more, shares in the investment company are trading at a massive 26% discount to its NAV, giving investors the opportunity to pick up its shares for significantly less than the sum of its parts.

Unquoted companies

The company is invested in a number of high-growth sectors, which include healthcare, hospitality, lifestyle and real estate. And in addition to owning listed equity investments, 33% of the portfolio is invested in unquoted companies. This gives investors exposure to companies that are in the developing stage or have under-tapped potential.

It’s not an investment suited for everyone, but for investors looking for an undervalued play on Asia, Symphony International Holdings could be a great pick.

The post 2 cheap investment trusts I’d consider in February appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

We do need another hero

Unlike Woodford, who said a very public sorry for his recent underperformance, BlackRock fund manager Mike Prentis has nothing to apologise for. While Woodford Patient Capital Trust is down 3% over the last year, his BlackRock Smaller Companies Trust (LSE: BRSC) fund is up a whopping 36%, which makes Prentis an unsung hero in my eyes. Some people just do not get the glory they deserve.

This success is no flash in the pan. Prentis has been running the trust since 2002, and over the last five years has returned an astonishing 165%, according to Trustnet.com. He is working in a buoyant sector right now but has still outstripped his UK smaller companies benchmark, which grew 133% over the period. Prentis is also co-manager of the BlackRock Throgmorton Trust, which has delivered almost identical performance figures.

Cut-price star

BlackRock Smaller Companies is 100% invested in the UK and top holdings include CVS Group, Dechra Pharmaceuticals, Advanced Medical Solutions and Bodycote, which may be familiar to regular Fool readers. Many of these are listed on the FTSE 250 so its portfolio is not directly comparable to Woodford’s unquoted forays.

The BlackRock fund was launched way back in 1906 and currently runs to £595m, so it is not too unwieldy. Its performance record speaks for itself, and Prentis even manages to yield 1.69% a year from its portfolio of smaller stocks.

BlackRock Smaller Companies somehow trades at a discount to net asset value of -12.75%, astonishingly wide given its performance. As I said, Prentis is an unsung investment hero, which is not a problem Neil Woodford is ever likely to have. When Woodford Patient Capital Trust was launched in April 2015, such was the demand that is instantly traded at a hefty premium, which peaked at 15%.

Woodford at a discount

Today, the trust trades on a discount of -5.56%. This means that as well as seeing little or no growth, early bird investors have also taken a serious hit on that front.

Despite this, Patient Capital Trust is still the second most traded investment trust in the UK. Maybe that is due to the amount of people selling, I don’t know. Currently, the fund manages £787m, which is small beer by Woodford’s standards. He has proposed raising the maximum amount he can invest in unquoted companies from 60% to 80% of the trust. Now, I remain a fan but would be wary of following him even deeper into unfamiliar territory, especially when there are other managers who have shown they understand the terrain.

Mike Prentis is one, Giles Hargreave at unit trust Marlborough UK Micro-Cap Growth is another, returning 30% over one year and 152% over five. Past performance isn’t everything, but in this case, it is the deciding factor for me.

The post Should you dump Woodford Patient Capital Trust plc and buy this fast-rising investment trust? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones holds units in Marlborough UK Micro-Cap Growth, but has no position in any of the other shares mentioned. The Motley Fool UK has recommended Advanced Medical Solutions and Bodycote. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.