These products are often considered more complicated than their open-ended counterparts, but as FE Trustnet research has previously shown, trusts often outperform over the long-term.
We asked Oriel Securities analyst Iain Scouller to review the merits of holding the five portfolios listed below:
Finsbury Growth and Income Trust
The five crown-rated trust is headed up by FE Alpha Manager Nick Train (pictured). It has shattered the performance of the IT UK Growth and Income sector and the FTSE All Share over three, five and 10 years.
Over the past decade, it has made 358.69 per cent, compared with 172.05 per cent from the sector and 167.08 per cent from the index.
Performance of trust vs sector and index over 10 yrs
Source: FE Analytics
The trust is also a top-quartile performer in terms of stability: it has an annualised volatility of 16.22 per cent over 10 years. The FTSE All Share, by comparison, scores 18.14 per cent over this period.
The trust is primarily composed of consumer products, with 43.4 per cent of the portfolio allocated to the sector. Among its top holdings are alcoholic drinks company Diageo, consumer goods giant Unilever and publishing and education firm Pearson.
The trust is trading on a discount of 0.3 per cent with 5 per cent gearing, according to the AIC. It is currently yielding 3.31 per cent.
Temple Bar IT
Headed up by star contrarian manager Alastair Mundy (pictured), the three crown-rated trust has been a top-quartile performer over one, three, five and 10 years.
Over 10 years, the trust has returned 258.69 per cent, outperforming both the sector and index, although it has fallen short of Train’s Finsbury Growth & Income IT.
The trust is also significantly more volatile than Train's, owing to Mundy’s style of choosing unloved, out-of-favour stocks that he believes are well positioned for a rebound.
Over 10 years, the trust has an annualised volatility of 19.95 per cent – a third-quartile figure for the sector.
It is currently trading on a premium of 2.7 per cent, with no gearing. The trust is also yielding less than the sector average, at 2.35 per cent.
While the trust has a lower yield than the majority of the funds in the sector, Scouller says this is due to its strong performance over the past few years.
"[Mundy] doesn’t just buy stocks for the yield. Someone like Woodford would be more yield-aware," he said.
"If you’re looking for yield you might be better off looking at one of the others."
Edinburgh Investment
No name in the UK asset management world is bigger than Neil Woodford, and his four crown-rated trust certainly lives up to his reputation.
The trust is a top-quartile performer over three, five and 10 years, although it has lagged the sector over the short-term and has struggled to gain traction over the last year.
However, the trust has returned 238.17 per cent over 10 years, while remaining in line with the FTSE All Share in terms of volatility.
Performance of trust vs sector and index over 10 yrs
Source: FE Analytics
FE Alpha Manager Woodford’s portfolio is made up of blue chip names such as Royal Dutch Shell, Unilever, GlaxoSmithKline and Vodafone.
The trust is trading on a premium of 4.5 per cent and is more highly geared than the others in this list, at 20 per cent. However, it is one of the highest-yielding trusts in the sector, with a payout of 4.12 per cent.
Scouller says Woodford has a defensive management style, which has caused him to lag his competitors recently.
He adds that the trust suffered due to its high weighting to pharmaceuticals and low exposure to financials, which rallied last year.
Jupiter European Opportunities
FE Alpha Manager Alexander Darwall’s five FE Crown trust is the best performing in the IT Europe sector over one, three, five and 10 years.
The trust has trounced the performance of the sector and FTSE World Europe ex UK index over each period, delivering 524.69 per cent over 10 years, while the sector made 276.81 per cent and the index gained 177.68 per cent.
Performance of trust vs sector and index over 10 yrs
Source: FE Analytics
While the trust has delivered outstanding returns over each period, investors need to accept a higher level of volatility. Over 10 years, its score of 23.82 per cent is the highest in its sector.
It is trading on a premium of 1.4 per cent and is geared at 14 per cent.
Scottish Oriental Smaller Companies
The four crown-rated trust, headed up by Susie Rippingall, has delivered the highest returns of any trust in this list and is a top-quartile performer over one, three, five and 10 years.
Over the longer period, it has delivered an impressive 757.21 per cent, shattering the IT Asia Pacfic ex Japan sector average of 240.2 per cent.
The trust also more than doubled the returns of the MSCI AC Asia ex Japan index, which made 296.12 per cent over the period.
Performance of trust vs sector and index over 10 years
Source: FE Analytics
While the trust is on a premium of 3.5 per cent, it currently has a negative gearing of 1 per cent.
Scouller says the numbers are still strong on the trust and he has faith in Rippingall's stockpicking and management style.
"The numbers are still very good," he said.