The market challenges of 2016 have been well documented, but for skilled fund managers the tougher conditions have led to several opportunities.
In the investment trust universe, several funds celebrated strong returns last year as specialist sector strategies emerged as the big winners.
The best performing investment trust sector during 2016, according to data from FE Analytics, was the commodities & natural resources sector. The sector reported a 61.84 per cent gain in 2016, compared with a loss of 38.98 per cent during the prior year.
Indeed, the best performing investment trust of 2016 was the BlackRock World Mining investment trust, which returned 100.6 per cent over the year.
BlackRock World Mining IT vs sector in 2016
Source: FE Analytics
2016 marked a strong turnaround in fortunes for the £593.8m closed-end fund, overseen by star manager Evy Hambro and Olivia Markham. The fund had previously recorded losses of more than 30 per cent in each of 2015 and 2014. Last year is the first positive annual return for the fund since 2010.
It was joined by several other investment trusts focused on the commodities and mining sector.
The Baker Steel Resources trust also recorded a strong return for 2016, rising by 98.28 per cent, following a loss of 53.04 per cent during the prior year.
Elsewhere, the New City Investment Managers Golden Prospect Precious Metals fund was up by 98 per cent during 2016.
Another strong performer from the sector was the BlackRock Commodities Income investment trust. Also co-managed by Olivia Markham and joined by colleague and FE Alpha Manager Tom Holl, the trust returned 71.73 per cent in 2016.
Away from the commodities & natural resources sector were several other specialist equity investment trusts, albeit with a specialist geographical focuses.
Emerging markets equities funds were also beneficiaries of the strong commodities performance seen last year.
The JP Morgan Russian Securities fund, managed by Oleg Biryulov, was up by 87.48 per cent in 2015 building on a solid 12.37 per cent return for 2015.
Its sister fund the JP Morgan Brazil investment trust, overseen by Luis Carrillo and Sophie Bosch de Hood, was also among the year’s strongest performers and recorded a 63.49 per cent gain.
More conventional investment trust strategies also performed well. Nick Train’s Lindsell Train investment trust was up by 61.86 per cent, following a 54.27 per cent gain in 2015. 2016 marked the eighth consecutive annual gain for Train’s investment trust.
Lindsell Train investment trust annual performance over 10yrs
Source: FE Analytics
As well as emerging markets-focused investment trusts, North American strategies performed strongly, thanks in part to the strengthening value of the US dollar.
The average North America equities investment trust was up by 42.37 per cent, while the average smaller companies strategy was up by 38.85 per cent.
At the other end of the performance table, things were less clear.
One of the worst performers outside of VCT and alternative strategies sectors was the global smaller companies-focused fund Marwyn Value Investors, which fell by 29.09 per cent.
Another significant underperformer was the BlackRock Income Strategies trust, managed by Adam Ryan, which lost 16.02 per cent over 2016 following a 7.98 per cent gain during the prior year.
The Brexit referendum result also had repercussions for UK smaller companies-focused trusts. The SVM UK Emerging investment trust was down by 14.39 per cent in 2016, while the Montanaro UK Smaller Companies fund lost 13.93 per cent.
Outside of VCT and alternative strategies, the UK All Companies sector was one lowest of the poorest performers.
The JP Morgan Mid Cap investment trust – one of the sector’s biggest names – recorded a loss of 11.29 per cent for 2016.
Other notable losses in the sector, included Neil Woodford’s Patient Capital trust, down by 9.75 per cent, and the Schroder Mid Cap investment trust, which lost 8.25 per cent over the year.