Woodford and Nimmo trusts upstage flagship funds
Investors who only hold open-ended vehicles are missing out on the best-performing portfolios of some of the biggest names in the industry.
By Joshua Ausden, News Editor, FE Trustnet
Wednesday May 09, 2012
Neil Woodford,
Andy Brough,
Harry Nimmo and
Alexander Darwall are among a number of star managers whose investment trusts have a better record than their higher profile open-ended funds, a recent
FE Trustnet study has found.
The likes of
Invesco Perpertual High Income,
Standard Life UK Smaller Companies and
Jupiter European – which are all multi-billion pound favourites with UK investors – have fallen short of their closed-ended competitors in recent years.
Since Woodford took over as lead manager of the Edinburgh Investment Trust in September 2008, the portfolio has returned 65.45 per cent – more than twice as much as his £12bn Invesco Perpetual High Income fund.
With a one-year historic yield of 4.43 per cent, the trust is also yielding 0.6 per cent more than Invesco’s flagship portfolio.
Performance of fund vs trust since September 2008
Source: FE Analytics
Trusts run by FE Alpha Managers Nimmo, Brough and Darwall, as well as emerging market stalwart
Dr Mark Mobius, Investec’s
Alastair Mundy and Unicorn’s
John McClure have been even more dominant.
Over three and five years, all six managers have seen their trusts perform better than the equivalent fund.
One of the biggest margins of outperformance has come in the case of Mobius; according to FE data, his Templeton Emerging Markets trust has delivered 75.55 per cent over five years, compared with 14.42 per cent from the
Templeton Global Emerging Markets fund.
While Brough’s £1.3bn
Schroder UK Mid 250 fund has come under fire from a number of IFAs for poor performance in recent years, the manager’s £93.6m trust has fared much better.
The trust has outperformed its FTSE 250 ex IT benchmark over one-, three-, five- and 10-year periods. By contrast, the fund has fallen short of the index over all four time periods.
Performance of trusts vs funds over 10-yrs
Source: FE Analytics
Nimmo’s
Standard Life Smaller Companies Trust has a vastly superior record than the Standard Life Smaller Companies fund over three and five years. In spite of a disastrous 2002 in which it lost nearly 60 per cent, the trust is also closing in on its open-ended equivalent over a 10-year period.
Mundy’s Temple Bar Investment Trust has beaten the Investec Special Situations fund comfortably over three-, five- and 10-year periods, and also has a higher one-year historic yield. He took over both in 2002.
While more volatile, Darwall’s Jupiter European Opportunities trust has fared much better than his fund over the last decade. The £221m closed-ended portfolio has the best record of any European fund or trust over 10 years, with returns of 232.13 per cent.
Performance of trust vs fund over 10-yrs
Source: FE Analytics
The study once again raises the question of why investors tend to overlook investment trusts in favour of open-ended funds, even though these vehicles tend to benefit from lower charges and gearing in the long-term.
Gearing can, of course, work against trusts, particularly during down markets, which is why the majority tend to be more volatile than their open-ended counterparts. However, the difference in returns during up markets can be huge.
In the case of the Standard Life UK Smaller Companies Trust and fund, for example, the difference in returns between the two in 2009 and 2010 was 13.33 and 23.29 per cent respectively. Although the portfolios aren’t identical, in general the major holdings are the same. Paddy Power, ASOS, Rightmove and Abcam are top-10 positions in both portfolios.
The effect of cost on performance in the long-term, which
was examined in detail in a recent FE Trustnet study, has also had a bearing. In most cases the total expense ratio (TER) for trusts is significantly lower than their open-ended counterparts; for example the Jupiter European Opportunities trust has a TER of 0.94 per cent, compared with 1.79 per cent for Darwall’s Jupiter European fund.