According to the Association of Investment Companies, 26 investment trusts were established before 1914 and are still around today, with combined assets under management (AUM) of £25.5bn – almost a quarter of the industry’s £114.5bn.
Such a long period of history has seen the investment landscape change significantly, as Katherine Garrett-Cox, chief executive of the 126-year-old Alliance Trust points out.
“When the company was founded, it was a mortgage bank; borrowing money from investors in the UK and lending it to pioneer farmers in the north western United States, in places such as Oregon and Washington State,” she said.
“In the intervening 126 years, at various times Alliance Trust has been predominantly invested in mortgages, land, bonds and now equities and during that time we have survived wars, recessions, depressions, crashes and hyperinflation.”
Eighteen trusts still plying their trade today were launched in the 19th century – some among the best performers of recent years in the IMA universe.
The history of the open-ended industry is far less established, with only a handful – including JPM Natural Resources, Fidelity Special Sits and M&G Recovery – launched before 1980.
Source: AIC
The durability of closed-ended funds, particularly during periods of market stress, shows their potential for long term return, according to John Newlands, head of investment companies research at Brewin Dolphin.
“This is a message that is forgotten in the good times but is worth reminding investors when sentiment is at a low ebb,” he said.
“Having studied a number of the long-lived trusts in historical detail, I have been struck by the way that they have proved robust enough to survive every crash and global conflict in history and then move forward again.”
“A minority of others fell by the wayside, of course. But I am convinced that by investing in a spread of quality companies, each one of which has been closely scrutinised prior to purchase, the enduring trusts have created portfolios that are as tough as ox hide.”
Whist the data doesn’t go back to 1914, according to FE Analytics two of the most successful trusts over the past decade have been Scottish Mortgage and F&C Global Smaller Companies.
The two trusts are among the top-three performers in the IT Global sector over five and 10 year periods.
The F&C trust weathered the storms in 2008 and 2011 particularly well, making a small profit in the latter year. Over the past ten years Scottish Mortgage has returned 348.83 per cent and F&C Global Smaller Companies has returned 335.22 per cent.
The average return in the sector over this period is 158.07 per cent.
Performance of trust, sector and index over 10yrs
Source: FE Analytics
While Scottish Mortgage tends to fall further than its peers during market sell-offs, it has proven extremely consistent, beating the IT Global sector average in eight of the last 10 calendar years.
The managers of the trusts emphasise long term growth in differing ways. Anderson, alongside deputy Tom Slater, has a keen focus on long term trends such as 'disruptive technology'.
He favours stocks with emerging market exposure, with large positions in the likes of Google, Facebook, Amazon, Baidu and Tencent. Ewins invests chiefly in developed equities, but also can invest in emerging markets when he sees suitable opportunities.
North America and the UK currently make up 60 per cent of his regional exposure, with Europe third at 12 per cent. Japan is also notably represented, making up 8.8 per cent of assets.
Whilst the manager tends to invest directly in companies, he gets all of his Japanese exposure via other investment vehicles.
The M&G Japan Smaller Companies fund and Aberdeen Japanese Smaller Companies funds are the two largest holdings, at 4.4 per cent apiece.
Like Scottish Mortgage, the best performer in the IT North America sector over 10 years – the JP Morgan American Investment Trust – also has a focus on technology.
The 141-year-old trust has clearly adapted to the times, with more than a quarter of its assets in tech. Facebook is its largest holding.
Over the past 10 years the trust has made 174.43 per cent – more than 50 percentage points more than the S&P 500.
Performance of trust, sector and index over 10yrs
Source: FE Analytics
Garrett Fish, who has been lead manager since January 2003, says the trust has benefited over the long-term from its actively managed exposure to the broadly diversified US equity market.
“The dynamic nature of the US economy has continued to attract capital as new and existing companies grow their businesses, invest in new technologies and generate attractive returns.”
“The trust remains relevant in providing investors with a gateway to this marketplace and has successfully demonstrated its resilience across market cycles.”
