While Mark Barnett’s portfolio hasn’t shot the lights out like others in the sector, it has delivered above-average returns with below-average volatility over the long-term.
Artemis Alpha has the best results over 10 years, returning 319.32 per cent. However, the trust’s extreme volatility and poor record during down markets is likely to put off many investors.
It lost 38.08 per cent in 2002 following the dotcom crash, 29.93 per cent in 2008 in the wake of the financial crisis and lost 18.49 per cent in 2011 while the FTSE All Share index was down just 3.46 per cent.
The Keystone Investment Trust, however, has offered a decent balance between capital preservation and out-and-out growth.
FE Analytics data shows that the fund has returned 249.84 per cent over the last decade compared with 110.58 per cent from the FTSE All Share index.
While it had a difficult year in 2002, underperforming the index by some 12 percentage points, it lost half as much as the index in 2008 and managed to post a positive return in 2011.
Performance of trusts vs index in down markets
| 2011 returns (%) | 2008 returns (%) | 2002 returns (%) | |
| Keystone Investment Trust | 2.64 | -16.66 | -34.36 |
| Artemis Alpha | -18.49 | -28.14 | -38.08 |
| FTSE All Share | -3.46 | -29.93 | -22.68 |
Source: FE Analytics
Keystone’s investment approach is in the mould of the majority of Invesco Perpetual’s equity portfolios, in that it aims for above-average performance with below-average volatility by holding quality, cash-rich companies.
Ewan Lovett-Turner, analyst at Numis Securities, says that the manager’s value approach dictates that the fund is naturally a little defensive.
"In addition to the Keystone Investment Trust, Barnett also runs the Perpetual Income and Growth Trust and the Invesco Perpetual Select UK Strategic Income fund in the open-ended space," he commented.
"All of his portfolios share the same key themes and are focused on the pharmaceutical and tobacco sectors."
"These areas have defensive characteristics and are less economically sensitive than other industries."
Keystone Investment Trust’s top-10 holdings include Reynolds American, British American Tobacco and Imperial Tobacco, as well as pharmaceutical firms GlaxoSmithKline and AstraZeneca.
These companies have helped contribute to the trust's lower-than-average volatility. Our data shows that over the last three years, it has an annual score of 14.34 per cent, the second lowest in the sector.
The low volatility has led to the fund having one of the highest Sharpe ratios in the sector. This measure compares a fund's return relative to a notional risk-free investment. The difference in returns is then divided by the fund’s volatility.
Lovett-Turner continued: "Mark is a manager we rate highly. He has a strong record and a clear investment style."
"The Keystone Trust has a slight emphasis on growth but in general looks pretty similar to his other income funds."
Our data shows that the investment trust is trading at a discount of around 5 per cent.
"The discount isn’t huge compared to others in the growth sector because the fund has a decent yield. All income-paying assets are in high demand right now," Lovett-Turner added.
The trust has a total expense ratio of 0.9 per cent.