In the world of investment trusts there has been a similar performance to the broader market with most of the best performing sectors being those that invest in specialist areas.
Source: FE Analytics
The highest average sector performance in the Association of Investment Companies (AIC) universe came from the IT Biotechnology & Healthcare sector, where the average trust made 37.79 per cent. Biotech stocks in general had a strong year.
With just four trusts in the sector, there was clear outperformance by the SV Life Sciences
International Biotechnology trust, which gained 46.99 per cent.
The sector’s next best performing trusts in 2014 are Frostrow Capital Biotech Growth and Frostrow Capital Worldwide Healthcare, which returned a respective 42.04 per cent and 37.32 per cent.
Performance of trusts and index in 2014
Source: FE Analytics
Following a sharp correction in March when biotech stocks sold off, it has consistently been one of the best performing parts of the market this year, partly as a result of the Ebola virus which, having killed more than 7,500 people mostly in West Africa, has teetered on the edge of global pandemic and sparked interest in firms working on potential cures.
Brenda Kelly, IG’s chief market strategist, told FE Trustnet back in November that investors should beware a coming correction in biotech stocks following a bull run partly fuelled by increased focus of the Ebola virus.
“Valuations may be a bit stretched but as long as there are fears of Ebola there will be an attraction for biotech stocks given the demand we have seen over the past six months. However, given a 40 per cent gain over the past six months there could be a correction due,” she said.
The next best performing sector was IT Country Specialists Asia Pacific, although most of the top performance within in the sector came from funds investing in one particular high growth country.
The sector has performed particularly well over the past 12 months compared to the previous year, moving from the position of 22nd highest performing sector in 2013 to second this year.
Thanks to a strong upswing in sentiment following the election of the reformist Narendra Modi in March, the Indian stock market has been one of the best performers globally in 2014.
The three India specialist trusts in the IT Country Specialists Asia Pacific sector were also the three best performers over the course of the year.
Ocean Dial Asset Management India Capital Growth, Aberdeen Asset Managers New India and JP Morgan Indian have all comfortably beaten the index with the first being the standout performer.
Performance of trusts and index in 2014
Source: FE Analytics
Managed by David Cornell since January 2010, the manager says the prospect of reform has been the major driver of a reversal of sentiment towards Indian equities.
“India has often flattered to deceive, commonly described as ‘long on potential, short on execution’. The current changes taking place, however, show that this is a country that can no longer be ignored by investors,” he said.
“Thanks to sound monetary policy from the globally respected Reserve Bank of India governor, Raghuram Rajan, India is much better placed to weather a tighter global monetary environment.”
“Furthermore, for the first time in the country’s history, there is both the electoral mandate and strong leadership under the helm of Narendra Modi, to create a cleaner political system which delivers long-term economic growth.”
He says while it has seen a significant upswing thanks to Modi’s premiership and his promised economic strategy, the market has a lot further to run as Modi implements his plan.
“The size of the opportunity on offer to overseas investors, coupled with the depth of managerial talent available in the stock market, presents an exciting chance to take part in a structural long-term growth story that is only at the beginning.”
The next best performing sectors are also more niche areas of the markets: utilities and property.
In the IT Utilities sector, which has just three members, the £40m Premier Energy & Water Trust was the top performer closely followed by the £350m Ecofin Water & Power Opportunities trust.
The Utilico investment trust returned 7.95 per cent, significantly less than the other two and the FTSE All World Utilities.
Performance of trusts and index in 2014
Source: FE Analytics
Property has been another high growth area of the market with the IT Property Securities sector averaging a 21.1 per cent return and the IT Property Direct UK sector 15.88 per cent. However the former has just two members with most of the growth coming from the £847m F&C Property Investment Trust, which gained 27.43 per cent.
The worst performing sectors in the AIC universe were also country specialists – the IT Country Europe and IT European Emerging Markets sectors, where the average performance was a loss of 27.43 per cent and 25.95 per cent respectively.
The Russian index has now lost 41.41 per cent over the course of the year and the four trusts that make up the two sectors all have significant exposure to Russian economy or its standoff with Ukraine.
The worst performing is JP Morgan Russian Securities, which has lost 45.57 per cent, followed by the Baring Emerging Europe and BlackRock Emerging Europe trusts which are down 30.4 and 23.52 per cent respectively.
The best of the four trusts has been the Fabien Pictet & Partners Ukraine Opportunity Trust despite its focus on a country effectively in a civil war. It is down 14.67 per cent year to date.
However 45 per cent of its portfolio comes from just one stock which is its own property company - Anthoreal Estates - and recently won the right to open a string of KFC outlets across the country.
