Profits from obscure and exotic international markets are tapped by investment trusts

As he discusses where he would invest his money, Peter Walls, manager of the Unicorn Mastertrust fund, identifies three investment trusts

Investing solely in investment trusts, Unicorn Mastertrust seeks to provide an alluring total return, mostly through capital growth. With a proud history spanning over 150 years, trusts have weathered every economic and geopolitical calamity imaginable.

Although Donald Trump's Liberation Day antics will likely cause some short-term inconveniences, I have no doubt that investment firms will continue to provide excellent services to investors for many years to come. My confidence is based on my conviction that an investment trust provides the best framework for long-term, profitable investments. Given that the majority of fund assets worldwide are in open-ended structures as opposed to closed-ended trusts, this is a pretty bold claim.

The portfolio is structurally biased in favor of trusts that invest globally in comparatively illiquid assets using their semi-permanent capital. Smaller businesses (both domestically and abroad), listed private equity (LPE) trusts, and specialized trusts that are only appropriate for a well-diversified portfolio are thus heavily represented in the fund.

British small caps have a lot of promise.

Aberforth Smaller Companies Trust (LSE: ASL), the biggest holding in the first category, is the only trust of its kind with a value-investing strategy in addition to being the largest. When interest rates were low after the global financial crisis, this investment strategy, which had been used continuously since its inception in 1990, underperformed for a long time.

The Brexit vote presented an additional challenge for the portfolio, which consists of about 80 smaller UK businesses, and the capital shift towards the American growth story accelerated after that. Corporate buyers were drawn to the market by the low fundamental ratings of ASL's investments, which resulted in a boom in mergers and acquisitions that appears to be here to stay.

An LPE trust that makes investments in buyouts in North America and Europe is the ICG Enterprise Trust (LSE: ICGT). These private company investments should normally be realized or refinanced in five to seven years, but sales have been a little elusive in recent years. Thus, there have been concerns expressed regarding the reliability of LPE trust valuations, and Mr. Market has made a decision by increasing discounts to net asset value (NAV).

Therefore, over the past five years, the compound annual growth rate (CAGR) of ICGT's NAV has increased at a rate of 13point 8 percent, whereas the CAGR of the share prices has only been 8point 5 percent. The NAV discount has risen to an astounding 37%. At a level that strongly validated the NAV and freed up funds for new investments and share buybacks, the managers announced earlier this month that they would be selling about 5% of the portfolio.

Aim for the gold.

Gold is a globally fungible commodity that is challenging to regulate with tariffs. Because of its potential volatility, my choice in the specialist trust category carries a bumper wealth warning. Investing in gold and precious metals businesses is what Golden Prospect Precious Metals (LSE: GPM) does.

With the remaining portion invested in silver producers, the fund's effective exposure to gold miners is 91%. GPM may be worth keeping an eye on if concerns about tariff-driven stagflation and interest rates remaining high for an extended period of time turn out to be accurate and inflows into physical exchange-traded funds (ETFs) continue.