It has been a difficult start to 2018 for global stock markets. Investors have been rattled by the prospect of rising interest rates, inflationary pressures, geo-political tensions and the threat of an increasingly tense trade war between the US and China.

The UK has been particularly under the cosh during the first quarter. Data shows that the FTSE 100 index has been the worst performing of all the world’s major stock markets since the start of 2018. The FTSE 100 has lost about 6.5% based on a closing level of 7,056.61 on 29 March 2018.

The FTSE All Share has performed even more poorly, down 7.8% between January  and March.

WEAK FIRST QUARTER GLOBALLY

But if there’s an investment cold doing the rounds in the UK, much of the rest of the world has also come down with the strain. Japan’s Nikkei 225 declined about 5.3% during the first quarter, the Eurostoxx 50 is 2.5% lower while S&P 500, arguably the best barometer for US equity performance, is off about 1.2%.

Unsurprisingly, given the backcloth, the performance of most of the UK’s listed investment trusts have struggled to post positive returns, either in net assets or share prices. The average decline in share price terms for the UK All Companies sub-sector is 5%, according to data from market maker and research house Winterflood.

Yet there are a small number of trusts that have sidestepped the negative runs of wider benchmarks to post positive returns. For example, the Artemis Alpha Trust (ATS) saw its shares rise around 2% during the first quarter to 296p. That may not look much in isolation but it represents substantial outperformance versus the performance of the UK’s major indices.

Artemis Alpha concentrates on UK-based investment, across the industrial and market cap segments. With a similar investment strategy, Fidelity Special Values (FSV) also managed to post a modest positive share price return (1%), while small cap specialists also performed well.

Shares in both the JPMorgan Smaller Companies Investment Trust (JMI) and the Crystal Amber Fund (CRS) returned 4% in the first quarter. Presumably this is a result of smart stock selection away from the spotlight of the FTSE 100.

JPMorgan Smaller Companies’ biggest stakes include mixer drinks runaway success story Fevertree (FEVR:AIM) and Fenner (FENR), the conveyor-belt manufacturer that recently accepted a £1.2bn takeover by French tyres giant Michelin.

SMART STOCK SELECTING

Yet the biggest first quarter outperformance has been posted by the relatively small Lindsell Train Investment Trust (LTI), up 20% in share price terms during the first quarter, closely followed by the even smaller Independent Investment Trust (IIT), 15% ahead.

Both of these trusts take stakes in companies from across the globe, although funds of both are predominantly invested in UK companies (74% for Lindsell Train and 93% for Independent).

Lindsell Train has hefty stakes in UK stock market stalwarts, such as Diageo (DGE) and Unilever (ULVR) with overseas market represented by the likes of Japanese computer games firm Nintendo and Heineken, the Dutch brewing group and Paypal, the US-based online payments giant.

SMALL CAP DARLINGS

Independent’s roster is chock full of smallcap market darlings, such as the previously mentioned Fevertree, where it has 8% of its funds invested. Other sizeable small cap stakes include 8.2% of the trust in robotic automation process technology star Blue Prism (PRSM:AIM), and 6.4% in online holidays booker On the Beach (OTB).

Independent also has 5.3% of its funds tied up in Katie Potts-run smallcap Herald Investment Trust (HIT).

A couple of Japan focused trusts have also substantially outperformed during the January to March period, even in the face of the Nikkei’s decline. Baillie Gifford Shin Nippon (BGS) chalked-up an impressive 8% first quarter performance.

Many of its investee companies will be little-known to UK investors, such as Outsourcing Inc or Yume No Machi Souzou, although some will have heard of Asahi Intecc, the beer maker.

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