Fantasy fund manager: Cherry Reynard

In the AIC’s first fantasy fund manager competition, we’ve asked six journalists to select four investment trusts that they expect to perform particularly well in 2025, but would be happy to hold for the long term. Below, Cherry Reynard explains which four trusts she thinks will make investors cheerful in 2025. 
 

JPMorgan US Smaller Companies

I’m not about to call the end of the bull run in mega-caps. However, it looks a little long in the tooth and the Trump agenda of tax cuts and deregulation may favour a different kind of company. US smaller companies have already started to rally in response to Trump’s victory, and confidence is picking up. While mega-caps have delivered the majority of earnings growth in recent years, there are signs of this broadening out as well.

With that in mind, I’d balance out a weighting in the mega-caps with an investment in a smaller companies fund, which makes sense from a diversification point of view, and a potential return point of view. The JPMorgan US Smaller Companies Investment Trust is on a 4.3% discount at time of writing, and has a five year return of 7.6% against a pretty tough backdrop.

JPMorgan US Smaller Companies profile page
 

Diverse Income Trust

The Diverse Income Trust is managed by small cap veteran Gervais Williams. It aims to provide capital appreciation and growing income through a multi-cap portfolio of UK equities. It currently has a chunky dividend yield of 4.6% and is on a 6.6% discount.

Investors will be well aware of the troubles of the UK market in recent years. A lot of column inches have been expended on the ‘UK about to turn’ story. However, although this hasn’t happened yet, the stars are aligning in 2025, with a combination of low valuations, buybacks, dividends and M&A, suggesting the UK could finally build self-sustaining momentum. In November, flows into UK funds turned positive for the first time in 41 months. The UK may finally be turning.

Diverse Income Trust profile page
 

Polar Capital Global Healthcare

Healthcare has a range of supportive themes: ageing populations, chronic disease, higher patient numbers and innovative new therapies. Yet it hasn’t generated the kind of excitement seen in areas such as technology. 2025 may finally see stronger relative performance from healthcare.

If I was feeling brave, I’d go for a biotechnology trust. These have been really out of favour. However, the Polar Capital Healthcare trusts offers a bit of everything, and has proved a safer and less volatile bet over the years. The discount (7.3%) has been narrowing in recent months as investors warm to the story.

Polar Capital Global Healthcare profile page
 

The Renewables Infrastructure Group

The renewable energy trusts have suffered from an unfortunate confluence of factors – poor sentiment, rising interest rates and have been hard hit by the cost disclosure problems. They are now sitting at some astonishing yields – 10-12% in some cases. With interest rates falling, cost disclosure (largely) resolved, there should be better times ahead for these unloved trusts.

Picking a single trust isn’t easy, but the Renewables Infrastructure Group is the largest of the diversified trusts. It currently has a 9% dividend, and is on a 32% discount to net asset value. It has a broad portfolio of assets, including wind, solar and battery storage projects, and operates across six countries in Europe. It had a really torrid time in 2024, but looks ripe for a recovery in the year ahead.  

The Renewables Infrastructure Group profile page

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