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The best-performing trusts of 2013

Sharply narrowing discounts allowed the best-performing trusts in the AIC universe to post returns of up to 45 per cent in the first three months of the year.

Thomas McMahon

By Thomas McMahon, Senior Reporter, FE ...
Friday April 12, 2013

Japanese, frontier markets and private equity trusts topped the performance tables in the first quarter of the year, according to research compiled by Oriel Securities.

However, trusts investing in natural resources and directly in property had a torrid time, with many of these struggling to perform despite rising equity markets.

"It is noteworthy that not all boats rose with the tide, indeed in spite of strong equity markets, it is clear that there has been a wide variance in performance over this short period," said Tom Tuite Dalton, investment trust analyst at Oriel Securities.

"In terms of geography, the top-performing funds have been focused on Japan, Vietnam, and frontier markets, whilst in terms of sectors, the winners have been private equity and healthcare."

Data from FE Analytics shows that private equity trust 3i Group was the best-performing fund in the first three months of the year, making 45.49 per cent.

Vietnam Holding was the second-best performer, with returns of 44.24 per cent, while the Baillie Gifford Japan Trust made 43.98 per cent in share price terms.

Best-performing trusts Q1 2013


Name Custom period performance
3i Group 45.49
Independently Managed - Vietnam Holding 44.24
Baillie Gifford Japan Trust 43.98
New Europe Property Investments 41.76
SVG Capital 39.56
Dolphin Capital Investors 38.39
Aberdeen New Thai IT 37.01
Ishaan Real Estate 36.3
Premier Energy&Water Trust 35.85
Real Estate Credit Investments 35.59

Source: FE Analytics

The share price of 3i rose strongly in January and February as activist investor Sherborne Group announced it was building a significant stake in the company.

Sherborne was responsible for the takeover of F&C Asset Management that resulted in a successful turnaround of the company, and the share price rose on the news of its involvement.

3i’s share price has been helped by a narrowing discount: the trust is currently on a premium of 9.9 per cent according to figures from Winterflood, compared with a one-year average discount of 18.6 per cent.

The trust has struggled in the medium-term, losing 30.55 per cent in share price terms over five years and making only 19.71 per cent over three, with the rumours of a takeover bid having a huge effect on demand for the trust.

The whole sector has also seen a narrowing of its discount over the past year, suggesting that the trust’s issues are not all of its own making.

Vietnam Holding is a surprise entrant on the list, in second place.

The $66m trust is concentrated, with just 22 holdings, and focuses on the under-researched companies that large international investors avoid.

According to Tuite Dalton, it has been benefiting from a narrowing discount as well as strong NAV performance, although it is still sitting on a discount to NAV of 21 per cent.


The shares are highly volatile, though, with an annualised score of 26.28 per cent over the past three years.

The trust has made 33.03 per cent over this time, while the MSCI Emerging Asia benchmark has made 9.43 per cent.

The Japanese market has been the success story of the first part of the year, with the TSE Topix index making 16.2 per cent in the first three months.

Data from FE Analytics shows that the Baillie Gifford fund made 43.98 per cent over the same time, but in the intervening two weeks has gone on a further spurt.

The trust is now up 57.57 per cent in the year-to-date, with the TSE Topix up 23.51 per cent.

Performance of trust vs index in 2013

ALT_TAG

Source: FE Analytics

Baillie Gifford Japan has a strong track record of beating its two peers in the country over three-, five- and 10-year periods.

Some experts have issued warnings over the medium-term prospects for the Japanese economy given the revolutionary monetary policy being embarked upon.

However, Baillie Gifford Japan looks for export-led companies, making it less dependent on the overall health of the Japanese economy.

It also focuses on smaller- and mid-sized companies, making it less index-sensitive.

Resources and property companies make up most of the worst performers so far this year, with the mining sector not participating at all in the rally.

"Resource-oriented funds, including Golden Prospect Precious Metals (-29.5 per cent), have been hit hard, but some now argue that as a result of the falls mining-related shares are now significantly undervalued," Tuite Dalton said.

Worst-performing trusts Q1 2013


Name Custom Period Performance
Psource Structured Debt -92.5
Alpha Pyrenees -81.54
Invista European Real Estate -74.03
Argo Real Estate Opportunities -47.07
Golden Prospect Precious Metal -29.48
Reconstruction Capital -23.12
Rapid Realisation
-20.93
Camper & Nicholsons Marina Investments -19.05
PME African Infrastructure Opportunities -14.91
Altus Resource Capital
-12.77

Source: FE Analytics

Golden Prospect Precious Metals is a £35.4m trust, currently trading on a discount of 12.5 per cent.


"Other Q1 laggards comprise certain niche direct property funds such as Invista European Real Estate and Hirco," Tuite Dalton continued.

"In contrast with the aforementioned direct property basket cases, the newly restructured £590m TR Property rose by 8 per cent in Q1. It invests in both direct and indirect property, trades on a 16 per cent discount and boasts a solid long-term record."

"In addition, not only does it yield 3.7 per cent but it has a track record of growing its dividend over time, unlike the majority of its direct property fund peers."

"What arguably sets TR Property apart from its peers has been its focus on quality management and prime locations."

TR Property is managed by Marcus Phayre-Mudge and Alban Lhonneur for F&C. The £594m trust is sitting on a discount of 13.9 per cent according to Winterflood, in line with its one-year average.

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