Although the holdings appear to stretch far, geographically the scope remains narrow. North America is a predominant region of focus, with more than 92 per cent of holdings in the US and a further 2.2 per cent in Canada. There are also small allocations to Luxembourg, the Netherlands and the UK.
Elsewhere, the top performer from 2017-18, Axiom European Financial Debt, has experienced an interesting journey since launch in November 2015. The fund lost 0.4 per cent in the 2016-17 period and has suffered share price weakness in the past. As of 12 February 2016, the fund’s share price had fallen from 98p at launch to 86.4p. But performance has been strong since, with the trust delivering nearly 20 per cent in 2017-18 and an average annual return of 9.1 per cent over the past two years.
In short, the positive overall performance of this cohort over the past two years masks some struggles. The specialised nature of these trusts means they should be avoided by those without a good understanding of the underlying investments – and trusts’ disclosures about the nature of these investments are not always as clear as they should be.
Still, the target yields of the better quality trusts should continue to tempt income seekers, as long as buyers appreciate that these are aims and not guarantees.
