The first investment trusts were set up in London and Scotland in the mid-1860s, to service the demand for interesting investment opportunities from the middle classes.
Many of the first closed-ended funds, including the Foreign & Colonial IT and Scottish American IT, are still open today.
There is much debate in the industry about what exactly can be defined as long-term, but it is safe to say that 140+ years is adequate by anyone’s standards.
The demand for dependable, "what-you-see-is-what-you-get" investments is as high now as ever, and given the breadth and depth of track records in this area of the market, trusts are as good a place as any to look to look for them.
With this in mind, FE Trustnet highlights five investment trusts that have at least a 50-year track record, have been headed up by the same manager for at least five years, have grown their dividends for at least 25 years in a row, and that have consistently outperformed their benchmark on a total return basis.
City of London IT
"This is the clear choice for those looking for dependability," said Charles Cade, analyst at Numis Securities.
"Job Curtis has been there for a very, very long time and is highly experienced and solid in his approach."
"He runs it quite conservatively and has handled the dividend very well, which has grown over a long period."
"If you’re looking for dependability, this is a good choice," he added.
Cade points out that the trust’s dividend is currently fully covered.
The City of London IT has grown its dividend 46 years in a row, according to the AIC, giving it the joint-longest dividend growth record in the entire investment trust sector.
The £869m trust is currently yielding a little over 4 per cent, and pays out four times a year.
Performance of trust vs sector
| Name | 1yr returns (%) | 3yr returns (%) | 5yr returns (%) | 10yr returns (%) |
|---|---|---|---|---|
| City of London IT | 23.36 | 57.36 | 62.64 | 204.15 |
| IT UK Growth & Income | 26.59 | 50.1 | 36.86 | 181.38 |
Source: FE Analytics
The trust also has a very strong total return record, according to FE data. It has beaten its IT UK Growth & Income sector – which is also its benchmark – over three, five and 10 years, and fallen only slightly short over one.
It has also been consistently less volatile, with an annualised score of 13.57 per cent over the last decade, compared with 15.26 per cent from the sector.
The manager invests almost exclusively in UK large and mid caps.
Around 40 per cent of the trust’s assets are in its top-10, which is packed full of defensive companies such as GlaxoSmithKline, AstraZeneca and British American Tobacco (BAT). He holds 115 stocks in all.
Curtis (pictured) has run the trust since 1991, but it was first launched more than a century ago, in 1891.
It has an ongoing charges figure (OCF) of 0.47 per cent, making it one of the cheapest in the sector. It is 8 per cent geared and is currently on a premium of 1.3 per cent.
Foreign & Colonial IT
The Foreign & Colonial IT is officially the oldest investment trust on the market, first launched in 1868.
The £2.6bn vehicle has grown its dividend 42 years in a row, and has been headed up by Jeremy Tigue since 1997. The yield is currently at 2.8 per cent. "This is another one with long-term divi growth and good cover," said Cade (pictured). "Tigue has been there a very long time and is a highly established manager in the IT world."
"It has moved with the times, adding a private equity arm to its portfolio. It uses currencies and gearing to add value – more effectively than most, in my opinion."
"It has been negatively impacted by a long-term debt position it took out a number of years ago, but once that expires, it will get a big boost," he added.
Performance of trust vs sector and benchmark over 3yrs
Source: FE Analytics
The F&C IT sits in the IT Global Growth sector and invests predominantly in developed markets.
It uses a composite index for its benchmark, split 60/40 between the FTSE All World Europe ex UK and FTSE All Share.
It has beaten its benchmark over three, five and 10 years, albeit with slightly more volatility.
The trust is currently on a discount of 10 per cent, and is 12 per cent geared. It has an OCF of 0.9 per cent.
Scottish Mortgage IT
"This one is more focused on long-term growth, and so is a little more volatile," explained Cade. "However, it has a very strong long-term record.
"The manager [James Anderson] is about to go on a six-month sabbatical. He has a very strong team and is certainly coming back, so I wouldn’t be too put off by this," he added.
The £2.6bn Scottish Mortgage IT has a very strong long-term record, with returns of 277.25 per cent over the last decade.
Its IT Global Growth sector and FTSE All World benchmark have returned 195.36 and 152.99 per cent respectively over the same period.
Performance of trust, sector and index over 10yrs
Source: FE Analytics
Anderson invests predominantly in the UK, Europe and US, but aims to get indirect exposure to higher-growth emerging markets.
He is particularly focused on companies that benefit from "extraordinary technological advancement" and says these make up a big portion of his portfolio.
He is very much a bottom-up stockpicker, and ignores short-term macro noise. He has said repeatedly in the past that investors should only hold his trust if they have an investment horizon of longer than five years.
Scottish Mortgage has an OCF of 0.51 per cent, is on a discount of 5.7 per cent and is 16 per cent geared. It has grown its dividend over 30 consecutive years and was first launched back in 1909.
Temple Bar IT
Cade says he has been impressed by manager Alastair Mundy’s contrarian approach, which has seen him consistently outperform – with below-average volatility – since he started running it in 2002.
The Temple Bar IT has significantly beaten both its IT UK Growth & Income sector average and FTSE All Share benchmark over three, five and 10 years, and just comes out on top over one.
Performance of trust vs sector and index over 10yrs
| Name | 1yr returns (%) |
3yr returns (%) | 5yr returns (%) | 10yr returns (%) |
|---|---|---|---|---|
| Temple Bar Investment Trust | 26.74 | 63.74 | 105.48 | 267.69 |
| IT UK Growth & Income |
26.63 | 50.15 | 36.91 | 181.49 |
| FTSE All Share | 17.81 | 31.83 | 29.03 | 152.46 |
Source: FE Analytics
Mundy and his predecessors have led the trust to 29 years of consecutive dividend growth. It is currently yielding 3.23 per cent.
The manager targets stocks that he believes are unfairly overlooked by the market.
He thinks that a value approach to fund management is the best way to make money over the long-term, because most companies are so well-researched, making it difficult for growth managers to outperform.
Mundy often looks at companies that have recently had a change in management, or those whose competitors have recently taken a hit.
Top-10 positions at the moment include builders merchants Grafton Group and Travis Perkins.
The £758m trust has an OCF of 0.51 per cent and is only 1 per cent geared. It is on a slight premium of 2.1 per cent.
Mundy also runs two open-ended funds – Investec UK Special Situations and Cautious Managed.
He told FE Trustnet in a recent interview that he is holding more cash than ever before, because he is struggling to find value in both the equity and bond markets.
Merchants Trust
"This is another established option, but it is maybe a bit more unpredictable than the others," said Cade.
"It tends to have a higher yield and uses more gearing than the others, which both enhances it and makes overall performance more volatile."
Cade points out that the trust has managed to maintain dividend growth for many years in a row – 30 in total – because it has been able to draw on its reserves.
Manager Simon Gergel has headed up the trust since 2006 and has led it to strong absolute and relative returns.
It is up 53.44 per cent over the last three years – almost twice as much as its FTSE 100 benchmark – but as Cade points out, it has been more volatile.
Gergel invests predominantly in high yielding blue chips, such as Glaxo, National Grid and Vodafone. The trust is currently yielding 5.1 per cent and is 20 per cent geared.
It has an OCF of 0.66 per cent and is on a discount of 3.9 per cent.