IT Global Smaller Companies has returned an impressive 107.02 per cent over this time, while the closest sector, IT UK Smaller Companies, made 50.56 per cent.
IT UK High Income is the third-best performing sector over three years, returning 44.14 per cent over the period.
Performance of sectors over 3-yrs
Source: FE Analytics
IT Global Smaller Companies has also been less volatile than other sectors and has achieved a Sharpe ratio of 1.32 over three years, the highest of any investment trust sector.
The next closest sector, IT UK High Income, achieved a Sharpe ratio of 1.02, while the UK Smaller Companies sector is third, with a figure of 0.98.
The Sharpe ratio calculates the level of a fund’s return above that of a notional risk-free investment – in this case, cash. The difference in returns is then divided by the fund’s standard deviation.
While there is no comparable open-ended sector for IT Global Smaller Companies, the IT UK Smaller Companies sector performed better than its closest alternative, IMA UK Smaller Companies, over three years, with the latter returning 42.15 per cent over this time.
The top-performing portfolio in IT UK Smaller Companies, Harry Nimmo's four crown-rated Standard Life UK Smaller Companies Trust, smashed the performance of its open-ended counterpart, the five crown-rated Cazenove UK Smaller Companies fund.
The Cazenove fund returned 81.77 per cent over the period.
Performance of trust vs fund and sectors over 3-yrs
Source: FE Analytics
Stephen Peters, investment trust analyst at Charles Stanley, says that while the IT Global Smaller Companies sector is difficult to compare because it is a “mish mash” of funds, the IT UK Smaller Companies sector has had a distinct advantage over it in recent years.
"The UK Smaller Companies sector is skewed towards quality, growth names," he explained.
"UK Smaller Companies is a bit misleading because most funds have a small to mid cap bias. There’s been very strong performance by mid cap funds over the last three years."
Peters adds that there are excellent fund managers, such as Nimmo, in the sector, as well as solid portfolios managed by BlackRock’s smaller companies team, which have benefitted the sector as a whole.
Winterflood’s James Brown says that while IT Global Smaller Companies has traditionally been a small sector in the investment trust space, it contains some standout portfolios.
"They are quite small sectors, so I’d imagine it’s the weightings of one or two funds driving those averages," he commented.
Speaking about the smaller companies sectors, Brown said: "They tend to be more volatile over the shorter term, but you can expect more growth from them over the longer term."
"[Global Smaller Companies] is such a broad mandate. You have to have some screens to bring that down because you can’t be analysing all those companies," he added.
Charles Cade, investment trust analyst at Numis, said: "Ultimately most of the [the trusts’] performance depends on the performance of the asset class they’re invested in."
Throughout the weekend, FE Trustnet will take a look at some of the best-performing investment trusts and why investors should be taking a closer look at them before the end of the year.