Investment trusts with long serving managers – at least a decade running the same portfolio – are generally the most popular with our readers in 2015, according to data from FE Trustnet.
The likes of Scottish Mortgage, Murray International, City of London and Aberdeen Asian Smaller Companies are four out of the five most viewed trusts on FE Trustnet so far this year. All have had the same manager for more than 10 years and some for much longer.
The numbers suggest investors value mangers that are in it for the long haul. As a recent article pointed out, half of investment trusts have a manager with at least a 10-year track record.
But the most popular trust of them all – the £1.3bn Edinburgh Investment Trust – has only been managed by Mark Barnett since January 2014 although its former manager Neil Woodford was in charge for six years.
The trust has had a good run since Barnett took over, returning 22.34 per cent, the best return in the sector over this period and a near tripling of the FTSE All Share’s 8.6 per cent gain.
Performance of trust, sector and index since January 2014
Source: FE Analytics
However some of this total return relates a narrowing discount, currently sitting at 0.9 per cent.
Barnett has reduced the portfolio’s exposure to healthcare since taking over from Woodford, as well as making it less concentrated but it is still mostly focused toward large and mega caps names such as Imperial Tobacco, BAT and Reynolds American.
Edinburgh, which currently yields 3.5 per cent, has an ongoing charges figure (OCF) of 0.68 per cent. It also charges a performance fee.
Next up, the bearish Bruce Stout’s £1.2bn trust is best in its IT Global Equity Income sector over 10 years and since the manager took over in June 2004.
Performance of fund, sector and index since 2004
Source: FE Analytics
However, performance has been rocky over the medium term and it has been bottom quartile over one, three and five years. Nonetheless, it is also the second most viewed this year after Edinburgh.
Stout has held the view for a long time that the market is “distorted” due to central bank intervention in the form of quantitative easing. This has led him to focus primarily on preserving capital over the past medium-term period.
Bruce told FE Trustnet earlier this year: “In the current hostile and unforgiving environment for corporate profitability, financial markets appear oblivious to problematic fundamental distortions as they are hypnotically hoisted higher by central bank manipulation”.
“Against such a complacent backdrop, the portfolio remains widely diversified and focused on capital preservation.”
It has a current yield of 4.7 per cent and an OCF of 0.73 per cent. It has a 5.1 per cent discount and is 15 per cent geared.
Aberdeen Asian Smaller Companies
Hugh Young has headed the Aberdeen Asian Smaller Companies team of four other managers – Flavia Cheong, Chou Chong, Adrian Lim and Christopher Wong – since 1995 and is one of the most highly regarded emerging market fund managers.
Over the longer term the trust is top decile, having smashed the MSCI AC Asia Pacific ex Japan index. It has returned 317.02 per cent over the past 10 years compared to the 170.03 per cent index gain.
Performance of fund, sector and index since over 10yrs
Source: FE Analytics
Young puts this down to a focus on quality companies with strong balance sheets, predictable earnings and sound corporate governance where he expects profits to grow over time.
However, it too has poorer numbers relative to its peers over one and three years during a time that Asian equities have been generally out of favour.
Simon Elliott, head of research at Winterflood Securities, tipped the trust at the beginning of the year, noting its move to a wider discount.
“Asian equities have also been out of favour and while they came back a bit last year, they certainly haven’t been the go-to asset class. However, the long-term growth prospects are attractive and Aberdeen Asian Smaller Companies is one we will watch.”
“It is managed out of Aberdeen’s Singapore office and is a Hugh Young trust which is highly resourced, has a strong track record and is focused on an exciting part of the market,” Elliott said.
It has a current yield of 1.6 per cent and an OCF of 1.46 per cent. Its discount is 10.4 per cent.
The fourth most viewed trust is the £3.3bn Scottish Mortgage, managed by James Anderson since 2000.
According to FE Analytics, Scottish Mortgage has gained 402.59 per cent over time, vastly more than the sector and index. It is also top decile over one, three, five and 10 years in the IT Global sector.
Performance of trust, sector and index since 2000
Source: FE Analytics
Anderson was joined by Tom Slater in 2009 who is now co-manager. The two mangers use a largely thematic approach to their portfolio ignoring quantitative methods of picking stocks more popular with many funds and trusts.
A recent article looked at how the portfolio has recently shifted away from its previous focus on the ‘the rise of China and technological disruption’.
Scottish Mortgage has an OCF of 0.5 per cent and is 10 per cent geared. It is on a current premium of 2.9 per cent.
Last up is Job Curtis’s City of London IT, which he has managed for almost a quarter century – since 1991 – making him one of the longest serving equity income managers in the UK’s open-ended and closed ended universes.
It has beaten the index in every full calendar year of the past full 10 years – apart from the 2009 – rally and it is also top quartile so far in 2015.
Over the past decade it has returned 174.99 per cent compared to a gain of 105.79 per cent in the IT UK Equity Income sector. The FTSE All Share gained 106.79 per cent.
Investment Quorum chief investment officer Peter Lowman has upped his stake recently as a way to find yield in a “stretched fixed income market”.
City of London has a long history of growing its dividend. It has done so in each of the last 48 years, putting it top for income growth in the whole Association of Investment Companies universe together with Bankers IT and Alliance Trust. Its yield is currently 3.7 per cent.
City of London IT has also scored highly for defensive metrics such as maximum drawdown and Sharpe ratio. It is top quartile for both over the past decade.
The trust has an OCF of 0.44 per cent and is 6 per cent geared. It is on a current premium of 2.2 per cent.