Managers who consistently provide high Alpha can prove the value of investing with them rather than through a cheaper tracker.
Here we look at those trusts whose managers have added the most value over the past three years.
Aberdeen New Thai
FE Alpha Manager Hugh Young’s £99.8m Aberdeen New Thai trust has added Alpha of 20.94 per cent to its Stock Exchange of Thailand benchmark over the past three years.
Over that time the fund has made returns of 170.3 per cent while the index is up 126.34 per cent, according to data from FE Analytics.
Performance of trust vs benchmark over 3yrs
Source: FE Analytics
Over 10 years, performance has been just as strong. The trust has made 895.17 per cent over the past decade, while its benchmark is up 457.57 per cent.
One of the patterns that emerges when looking at trusts with high Alpha is that they tend to be less volatile than their benchmark.
Aberdeen New Thai’s volatility of 17.29 per cent over the past three years compares favourably to the 18.87 per cent of the benchmark.
The trust has a total expense ratio (TER) of 1.5 per cent. While this is much higher than the average trust, the extra expense is understandable given the costs involved in running money in such a far-flung country, with the large Asian equities team under Young.
The trust currently has net gearing of 2.3 per cent.
Jupiter European Opportunities
FE Alpha Manager Alexander Darwall’s £277.4m trust has produced Alpha worth 22.09 per cent against the FTSE World Europe ex UK index over the past three years.
Darwall was recently picked by Oriel Securities as its manager of 2012 for his stockpicking abilities, which saw the trust make 31 per cent in NAV terms and 53 per cent in share price.
Performance of trust vs benchmark in 2012
Source: FE Analytics
Investors will now have to pay a small premium, although it has recently come down to 0.3 per cent from around 1 per cent.
The volatility on the fund over the past three years is 21.15 per cent, marginally below the 22.36 per cent of its FTSE World Europe ex UK index.
Jupiter European Opportunities is the best-performing trust focused on Europe over three, five and 10 years, while it has also beaten the manager’s open-ended Jupiter European and Jupiter European Growth funds over each of those timeframes.
The TER on the fund is 1.12 per cent and it is 15 per cent geared.
Acorn Income
John McClure’s Acorn Income trust has produced 28.83 per cent of Alpha over the past three years, compared with the Numis Smaller Companies (ex IT) index.
The FE Alpha Manager’s portfolio was named in an earlier study as the best-performing trust of 2012, for its returns of 58.82 per cent.
Over the past three years its annualised volatility of 15.39 per cent compares favourably to the 16.14 per cent of the index.
The £34.03m portfolio provides a healthy yield of 4.72 per cent from small and mid cap companies and selected fixed interest investments.
The trust charges a performance fee and is currently trading on a discount of 7.07 per cent, according to data from FE Analytics.
European Assets Trust
This five crown-rated smaller companies trust has been run by Sam Cosh since October 2010, and has added Alpha worth 15.49 per cent to the performance of the HSBC Smaller Europe (ex UK) index over the past three years.
The £114m trust is currently yielding 5.9 per cent, more than double the nearest figure made by the other three European smaller companies trusts.
It has made 63.7 per cent over the past three years, according to FE Analytics, more than four times the gains of the HSBC Smaller Europe (ex UK) benchmark.
The manager said last month that he was starting to see growing interest in European assets, which is likely to drive markets this year and boost returns even more.
The trust has a TER of 1.67 per cent and is currently sitting on a discount of 3.5 per cent.
Scottish Oriental Smaller Companies
First State Scottish Oriental Smaller Companies has returned a massive 742.81 per cent to investors over the past 10 years and has more than doubled in value over the past three.
Performance of trust vs benchmark over 3yrs
Source: FE Analytics
Over that time it has produced Alpha worth 19.86 per cent against the MSCI AC Asia ex Japan benchmark.
The fund has been managed by Susie Rippinghall since October 2000, but from April will be taken over by FE Alpha Manager Angus Tulloch, with Wee-Li Hee and Scott McNab as co-managers.
The trust has more than doubled the 101.25 per cent returned by First State Asia Pacific Sustainability over the past five years, making 221.16 per cent in that time.
Despite this it has a market cap of just £228.1m, less than the 263m of the Sustainability fund.
Both First State Asia Pacific and First State Asia Pacific Leaders have returned less than the Sustainability fund, yet contain £6.64bn and £843m respectively in assets.
The trust has a TER of 1.01 per cent and a performance fee – which FE Trustnet research has suggested may be measured against an inappropriate benchmark.
In an article earlier this week, FE Trustnet looked at five funds that add the most value to their benchmark.