Nearly half of investment companies have had the same manager for at least a decade, according to data released this week by the Association of Investment Companies (AIC). 
The report shows that out of the 186 investment companies that have existed for a decade or more, 83 of these have been managed by the same person for at least 10 years.
The longest-serving manager in the space is Hugh Mumford, who has managed Electra Private Equity for more than 33 years. Household names are also in the list including James Henderson (pictured), who has been at the helm of Lowland since 1990, and Job Curtis, who has run the City of London trust since 1991.
Investors tend to value a manager who sticks with a portfolio, as it allows their experience to come to the fore and minimises the number of times they have to weigh up what to do in the event of personnel change.
According to data from FE Analytics, 11 trusts in the AIC Investment Companies Universe that have had the same manager for more than 10 years have achieved stellar returns of more than 300 per cent over this time frame.
In the below article, FE Trustnet looks at three popular trusts that have benefitted from having the same manager in the driving seat for more than 10 years.
It probably comes as no surprise that Nick Train’s five FE Crown-rated trust has made its way onto the list, given the very long-term approach the manager has running through his investment process.
Since being launched by the FE Alpha Manager in 2001, the £99m trust has achieved a total return of 407.23 per cent, outperforming its peer average in the IT Global sector more than two and-a-half times over.
Performance of trust vs sector over manager tenure
Source: FE Analytics
Train, who is also a founding partner of Lindsell Train alongside Michael Lindsell, was awarded FE Alpha Manager status for maintaining a proven and consistent track record in rising and falling markets, as well as not conforming to market patterns.
However, as to be expected from a high profile manager’s trust with a strong performance track record, the trust is currently trading at a significant premium of 21.9 per cent. It has an AIC ongoing charge of 1.14 per cent.
Not only does Lindsell Train IT have a great performance track record, it has achieved top-quartile annualised volatility of 15.88 per cent, a top-decile alpha ratio, which measures performance in excess of the benchmark, of 9.24 and a top-decile Sharpe ratio, which measures risk-adjusted performance, of 0.52 since launch.
In the trust’s annual report this year chairman Donald Adamson said it will no longer use gearing, in order to keep costs minimal. This will also mean that governance around borrowing will be more flexible for the trust.
Lindsell Train IT yields 1.5 per cent.
Standard Life UK Smaller Companies Trust
When looking at this trust’s performance since its launch in 1994, it has been nothing short of disappointing, having achieved less than half of the returns of both its sector average and benchmark.
However, since FE Alpha Manager Harry Nimmo took over the helm in 2003 following the departure of Gareth Rudd after just seven months, the trust has returned 644.4 per cent, outperforming its benchmark and sector average by 326.57 and 310.94 percentage points respectively.
Performance of trust vs sector and benchmark over manager tenure
Source: FE Analytics
Rudd had taken over the £31.1m trust – then called Edinburgh UK Smaller Companies Investment Trust – from Alistair Currie, who had been running the trust for almost a decade.
However, Currie was made redundant alongside 16 others as a result of a strategic review by Edinburgh Fund Managers. During the trust’s time with Edinburgh, it delivered a negative return of 45.59 per cent while its peer average achieved a positive return of 89.62 per cent.
This is now of course a far cry from how the trust is currently performing – not only does it boast strong returns, Standard Life UK Smaller Companies has top-quartile annualised volatility, Sharpe ratio, alpha generation and a maximum drawdown, which measures peak-to-trough performance, over Nimmo’s tenure.
The manager has struggled over more recent time frames, including a harsh 2014 when its losses of 15.10 per cent when 10 percentage points higher than his average peer’s. However, fund pickers say investors should remembered Nimmo’s long-term record and well established process.
The trust’s portfolio usually consists of around 60 holdings that represent Nimmo’s highest-conviction investment ideas. Currently, the fund’s largest overweights relative to the benchmark are Ted Baker, clinical software supplier Emis, real estate investment trust Workspace and polymer solutions manufacturer Victrex.
Standard Life UK Smaller Companies Trust is geared at 6 per cent and yields 1.5 per cent.
Out of all of the trusts in the AIC universe that have had the same manager for more than a decade, The Biotech Growth Trust is by far the top-performer.
Since Geoffrey C Hsu and Richard D Klemm took its helm in May 2005, the £535m trust has returned 772.69 per cent. What’s more, it has outperformed its IT Biotechnology & Healthcare sector average by 318.35 percentage points.
Performance of trust vs sector over management tenure
Source: FE Analytics
However, the trust may be better suited to stronger-stomached investors, as it has also produced bottom-decile annualised volatility of 21.25 per cent and a bottom-decile maximum drawdown of 33.82 per cent throughout the management duo’s tenure.
The biotech sector is renowned for being aggressive and has been immensely popular over the last decade. However, in an article published last month, FE Trustnet explored whether the biotech bubble could be about to burst.
Anna Hauguard, fund analyst at Brewin Dolphin, believes that a correction could be on the cards but certain areas of the market look less susceptible than others.
“There are certainly expensively valued stocks and sub-sectors in the group – particularly small-caps – and more corrections probably lie ahead in those areas, which is why selectivity and active management is important,” she said. “We do think large-cap biotechs are very different this time around – many are profitable fairly mature companies with large and growing addressable markets. Although biotech stocks remain toward the higher end of the range of their historical valuations, they are not more expensive than they were a year ago.”
The Biotech Growth Trust holds larger companies in its top ten holdings including Biogen, which specialises in delivering therapies for neurodegenerative diseases, Illumina, which manufactures systems for analysis of genetic variation, and Celgene, which manufactures drug therapies for cancers.
The trust, which is currently trading at a 6.9 per cent discount, is geared at 14 per cent.
