They dominate performance tables over one, three, five and 10-year periods in areas including emerging markets, Asia and Europe, as well as multi-regional sectors.
The trend is most evident in Asia, where four of the five best-performing vehicles among the IMA Asia Pacific ex Japan and IT Asia Pacific ex Japan Equities sectors over one, three, five and 10 years are closed-ended.
The Aberdeen Asian Smaller Companies Investment Trust is the stand-out performer, topping the table over all four time periods. In the last decade, the fund has returned 662.46 per cent, compared with 450.22 per cent from its closest rival, Scottish Oriental Smaller Companies.
Performance of funds and trusts
| Best-performing trusts |
1yr (%) |
3yr (%) |
5yr (%) |
10yr (%) |
| Aberdeen Asian Smaller Companies IT |
23.3 |
222.9 |
141.8 |
662.5 |
| Aberdeen Asian Income |
21.7 |
134.1 |
107 |
N/A |
| Scottish Oriental Smaller Companies |
16.6 |
223.6 |
119.7 |
450.2 |
| Best-performing funds |
||||
| Newton Asian Income |
15.2 |
141.8 |
91.8 |
N/A |
| Aberdeen Global Asian Smaller Companies |
11.5 |
146.7 |
120.4 |
N/A |
| First State Asia Pacific Leaders |
9.3 | 92.6 |
102.2 |
N/A |
Source: FE Analytics
Higher profile open-ended vehicles such as First State Asia Pacific Leaders and Aberdeen Global Asian Smaller Companies have returned significantly less over these periods.
Over one year, only Jason Pidcock’s Newton Asian Income fund has broken into the top-five performers. The £1.4bn portfolio has returned an impressive 15.18 per cent in the last 12 months, though it still lags the likes of the Aberdeen Asian Income and Schroder Oriental Income trusts, which have delivered 21.69 and 17.71 per cent respectively.
Global investment trusts also dominate their open-ended counterparts in the performance tables, even though there are significantly fewer of them available on the UK market.
Over three years, all five of the best-performing vehicles among the IMA Global, IMA Global Equity Income, IT Global Growth and IT Global Growth & Income sectors are investment trusts. These include the F&C Global Smaller Companies and Scottish Mortgage Investment Trust portfolios, which have returned 145.61 and 140.89 per cent respectively.
Performance of funds vs trusts over three years
Source: FE Analytics
The best-performing open-ended global fund over this period – Invesco Perpetual Global Smaller Companies – has amassed 112.73 per cent.
The Murray International Trust is the best-performing vehicle among the four sectors over both five and 10 years, with returns of 95.17 and 265.69 per cent respectively.
Open-ended funds fare better in the UK equity performance tables, though there are significantly more vehicles in IMA UK All Companies and IMA UK Equity Income compared with IT UK Growth and IT UK Growth & Income. However, the likes of the Capital Gearing Trust, Acorn Income and Neil Woodford’s Edinburgh Investment Trust have broken into the top-five best performers list in recent years.
This dominance once again calls into question retail investors’ overwhelming preference for open-ended funds over trusts.
In the latest FE Trustnet poll, two thirds of the 911 respondents said that they had less than one-third of their portfolio invested in closed-ended funds, and more than half of these had no exposure at all.
Only 18 per cent of FE Trustnet users said they had more than two-thirds of their portfolio invested in trusts.
While Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC), says she is encouraged by the number of retail investors with exposure to closed-ended funds, she believes the introduction of the Retail Distribution Review (RDR) will see this number grow even higher.
"In the past, few financial advisers have recommended investment companies but in 2013 the RDR is an important long-term opportunity for the sector," she explained.
"The RDR will abolish commission, putting investment companies on a more level playing field with open-ended companies, and independent advisers will have to consider investment companies alongside other investment products."
"We hope more financial advisers will find their way to investment companies and have started a training and education programme to assist advisers."