The most popular investment trusts with retail investors are seldom the best performing in their sector, according to FE Trustnet
While some of the most heavily marketed closed-ended portfolios on the market have done well in recent years, investors would have been better off looking further afield.
According to investment company analyst Winterflood Securities, the most popular trusts with retail investors are Witan Investment Trust, Fidelity China Special Situations and City of London IT.
Here is a selection of alternatives:
Retail choice: Witan Investment Trust
Alternative: Mid Wynd International IT
The Witan Investment Trust’s biggest draw is its simplicity. The multi-manager portfolio is seen as a one-stop shop for investors, since it offers diversification by geographical region, industrial sector and underlying fund manager.
However, the £846m portfolio has consistently fallen short of its peer group and benchmark recently. According to FE data, it has returned 154.82 per cent over 20 years, compared with 171.93 per cent from its composite benchmark and 228.07 per cent from the average trust in IT Global.
Performance of trust vs benchmark and sector
Source: FE Analytics
||1-yr returns (%)
||3-yr returns (%)
||5-yr returns (%)
||10-yr returns (%)
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|IT Global Growth
|Witan - Witan Investment Trust
Over 10 years, the trust has fallen short of its benchmark by around 11 per cent and although the underperformance has only been marginal over five years, it has had a disappointing one and three years as well.
The appointment of Andrew Bell in April 2010 was met with a great deal of media attention, but as yet the manager has yet to deliver; despite his more active approach, the portfolio has lost 3.05 per cent since he joined, compared with gains of 4.73 per cent from his benchmark.
A possible alternative to the Witan Investment Trust is Mid Wynd Internaitonal IT, which is headed up by Michael Macphee of Baillie Gifford. The £62.7m trust is among the three best-performing portfolios in IT Global over three, five and 10 years.
It has returned 148.95 per cent over the last decade – nearly three times as much as the Witan Investment Trust. It has also been less volatile than its rival over the period.
Like all of Baillie Gifford’s portfolios, Mid Wynd International IT takes an extremely long-term view even for an investment trust.
MacPhee is currently overweight emerging markets and tends to favour UK, European and US companies with indirect exposure to the likes of China and Brazil.
With a total expense ratio (TER) of 0.77 per cent, it is also one of the cheapest Global trusts on the market. The Witan Investment Trust currently has a TER of 1.07 per cent.
Retail choice: Fidelity China Special Situations
Alternative: JP Morgan Chinese IT
The shortcomings of Anthony Bolton’s trust since launch have been well documented. It continues to be backed by a number of IFAs – most notably Hargreaves Lansdown – and has so far managed to raise close to £500m, but it has lost around 16 per cent more than its benchmark since April 2010.
While experts are keen to remind investors that China is very much a long-term game, Simon Elliott of Winterflood Securities thinks there are better alternatives elsewhere.
"There are essentially two established options in this space – Fidelity and JPM – and I’d personally go for JPM," he said.
"We don’t tend to recommend single-country trusts so it’s not on our buy-list, but it’s got a far longer track record and it’s a Greater China trust which means that it can invest in Taiwan and Hong Kong."
"It’s also on a bigger discount [8.6 per cent compared with 4.8 per cent]," he added.
Performance of trust vs index over 10-yrs
Source: FE Analytics
Of all the China-focused portfolios in the IT Country Specialist: Asia Pacific sector, Howard Wang’s JP Morgan Chinese has the longest track record.
It has returned 135.46 per cent over 10 years, compared with 110.75 per cent from its MSCI Golden Dragon benchmark, and it has also outperformed the index over three, five and 10-year periods – albeit with more volatility.
The JPM trust has a TER of 1.41 per cent, compared wth Fidelity’s 1.81 per cent.
Retail choice: City of London IT
Alternative: Temple Bar IT
Launched in 1901, Job Curtis’ £676m City of London IT is one of the oldest and most established in the AIC universe. It is viewed as one of the safe bets in the industry, most notably because of its income record – it has managed to grow its dividend for 45 consecutive years.
However, when it comes to total return in the long-term, there are plenty of options in the IT UK Income & Growth sector that have a better record.
Performance of trusts vs sector over 10-yrs
Source: FE Analytics
Alastair Mundy’s Temple Bar investment trust, which has grown its level of income for 28 consecutive years, has returned more than Curtis’ vehicle over five and 10 years, with returns of 30.74 per cent and 115.93 per cent respectively.
City of London IT is more defensively focused than Temple Bar, due to its more stringent income policy. Mundy, who is well-known for his contrarian stock-picking approach, runs a more concentrated portfolio of stocks. The trust has significant positions in Signet Jewelers and Travis Perkins in its top-10 holdings.