Closed-ended funds, or trusts, are not considered for the AFI portfolios, but on the other ranking systems used by FE – FE Crown Fund Ratings and FE Alpha Manager ratings – the managers have achieved the maximum score.
All three have achieved five FE Crowns to go along with an FE Alpha Manager rating – the only trusts in the IT UK Growth & Income and IT UK High Income sectors to have done so.
Finsbury Income & Growth Trust
- FE Crown Fund Rating: 5
- FE Alpha Manager rating
The returns over the past decade are higher even than those of the MSCI Emerging Markets index, which has grown 286.4 per cent in this time. This suggests that good active management can beat good asset allocation.
Performance of fund vs indices over 10-yrs
Source: FE Analytics
Nick Train’s performance is even more remarkable given that he runs a highly concentrated portfolio of just 26 stocks.
In a recent interview with FE Trustnet he explained that the essence of his management style is to keep it simple and look for established companies with long-term potential.
Finsbury Growth & Income Trust sits second in the sector over five and three years, having managed to return 79.59 per cent over the shorter time frame while the FTSE All Share has made just 28.08 per cent.
The yield of the fund is only 2.51 per cent, according to FE Analytics, which is unlikely to satisfy pure income-seekers. Train aims for growth in income and capital rather than targeting a high yield.
The trust is currently trading at a premium to NAV of 1 per cent and has a total expense ratio (TER) of 1 per cent.
Edinburgh Investment Trust
- FE Crown Fund Rating: 5
- FE Alpha Manager rating
Performance of trust vs funds over 10-yrs
| Name | 3yrs (%) | 5yrs (%) | 10yrs (%) |
| Edinburgh Investment Trust | 64.17 | 45.84 | 209.72 |
| Invesco Perpetual Income | 34.03 | 15.84 | 200.27 |
| Invesco Perpetual High Income | 35.45 | 17.01 | 191.18 |
Source: FE Analytics
Over a five-year period it has almost trebled the returns of both Invesco Perpetual Income and Invesco Perpetual High Income.
The yield of 4.3 per cent is also considerably higher than the 3.78 and 3.76 per cent of the two open-ended portfolios, making it more appealing to investors looking to draw income. The sheer size of Woodford’s open-ended funds means that the manager is restricted to the FTSE 100.
On the Edinburgh Investment Trust, however, he has more freedom to look at mid cap companies, holding 13 per cent in the FTSE 250. This may be one reason for the higher capital gains.
Woodford (pictured) still has a weighting to the large cap defensive dividend-payers in the pharmaceutical and tobacco industries however, with a stake in AstraZeneca making up 9 per cent of the trust, the largest single holding.
The trust is trading on a premium of 6.3 per cent, making it expensive to access, while it has a TER of just 0.72 per cent – less than half the 1.68 per cent and 1.69 per cent charged by the open-ended funds.
Troy Income & Growth Trust
- FE Crown Fund Rating: 5
- FE Alpha Manager rating
The trust was a fourth-quartile performer in 2007, losing 25.53 per cent while the sector was down 6.58 per cent. In 2008 it lost 54.36 per cent as the sector fell 36.49 per cent, which also put it in the bottom quartile.
Since Brooke took over, however, the trust has returned 76.4 per cent, substantially higher than the 59.34 per cent from the average portfolio in the sector.
Over the past three years the annualised volatility of the portfolio has been 9.26 per cent, lower than the sector average of 9.98 per cent. The yield on the trust is currently 3.61 per cent, according to FE Analytics data.
Performance of fund vs sector since Aug 2009
Source: FE Analytics
Brooke’s portfolio is less concentrated than Woodford’s, with 34.1 per cent in the top-10 holdings, compared with Woodford’s 58.3 per cent.
The manager has been using the recent dollar weakness to top up the US companies in the portfolio, increasing holdings in Microsoft and Coca-Cola.
His strong performance has seen rapid inflows to the fund, leading it to frequently trade on a premium to NAV.
The manager has committed to using share buybacks to keep the premium at 0, but it is currently trading at 1.4 per cent above NAV.
The TER is 1.31 per cent.