In a recent article, we asked you to tell us what stocks you are currently backing, and the demand for information on listed closed-ended funds was so strong that we decided to dedicate a whole section to them.
Here are five of your most popular choices under the spotlight.
Scottish Oriental Smaller Companies IT
The £287m trust was the most popular choice among investors overall, which is hardly surprising given its performance record.
According to FE data, the trust has delivered a whopping 659.97 per cent over the last decade, significantly outperforming its sector and benchmark. Its absolute and relative numbers over one, three and five years are equally impressive.
Performance of trust versus benchmark and sector
| Name | 1yr (%) | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|---|
| First State Investments IT - Scottish Oriental Smaller Companies | 40.09 | 89.16 | 197.69 | 659.97 |
| MSCI AC Asia ex Japan | 11.68 | 14.65 | 40.89 | 269.38 |
| IT Asia Pacific excluding Japan Equities | 22.29 | 37.95 | 77.08 | 236.77 |
Source: FE Analytics
Stephen Peters, investment manager at Charles Stanley, says he rates the trust highly, and does not believe investors should be put off by the recent management change, which has seen the exiting Susie Rippingall replaced with the trio of Wee Li Hee, FE Alpha Manager Angus Tulloch (pictured) and Scott McNab.
"It’s a very, very good trust. It’s made a lot of money for investors and has a very good process," he said. "It focuses on the domestic growth story which has been very beneficial over the past four or five years.""People have a tendency to pick trusts that have done well, and a lot of outperformance in this case has happened because the small cap Asian market has performed well. This is worth bearing in mind, as it doesn’t mean the market will keep performing strongly."
"I met with [Wee Li Hee] who referred to herself as the lead manager, but I understand that since it’s her first investment trust, Angus Tulloch will be overseeing her."
"She has a very good record internally at First State, and has an excellent team around her."
Peters says it is hard to choose between Scottish Oriental Smaller Companies IT and its biggest rival, the Aberdeen Asian Smaller Companies IT, which has a better record over the long-term.
"The processes are very similar, you can fit a fag packet between them," he said. "Aberdeen got into the ASEAN countries a little earlier, which helped them, but other than that they’re very similar in that they buy quality, consumer-exposed mid and small cap companies in the Asian region."
He points out that both trusts are underweight China on corporate governance grounds, but that the Aberdeen trust has significantly more in India, Malaysia and Thailand. Singapore is First State’s biggest overweight.
Peters says he does not pay too much attention to discounts and premiums when it comes to equity investment trusts, but it is worth pointing out that the Scottish Oriental Smaller Companies IT is currently on a discount of 3.5 per cent, while the Aberdeen trust is on a discount of 0.3 per cent.
With an ongoing charges figure (OCF) of 1.01 per cent, the First State trust is cheaper, but unlike its rival it charges a performance fee.
Standard Life European Private Equity
Only one of our readers highlighted the £393m Standard Life European Private Equity trust as one that they are buying, but the private equity sector was one that featured heavily throughout.
Winterflood’s Innes Urquhart doesn’t think there is as much value in the private equity sector as there was, but says investors can still find attractive entry points if they’re selective.
He highlights the Standard Life trust as one of the better value plays in the sector.
"There’s still decent value, but you have to be a bit more selective now, whilst not so long ago you could pretty much buy anything," he said.
"It’s a less obvious value proposition than it was because discounts have come in so significantly, but there’s still value in something like the Standard Life European Private Equity IT."
According to the AIC, the trust is currently trading on a discount of 23.2 per cent, making it one of the cheapest in its sector.
"The trust benefits from an experienced management team and provides access to some of the strongest names in the European mid to large buy-out market," he said.
"With ongoing charges of less than 1 per cent, it is also less expensive than a number of its peers."
"It has continued to re-rate this year, and whilst discounts in excess of 20 per cent continue to prevail across the private equity fund of funds sector, given the quality of its portfolio we believe it remains attractive on a [23 per cent] discount."
The average discount of the trust over the last year is 27 per cent, and 33 per cent over three years.
A narrowing discount has contributed to the trust’s strong performance in recent years. Our data shows that the Standard Life European Private Equity IT has returned 69.29 per cent over a three-year period, beating its sector average, albeit with more volatility.
Performance of trust vs sector over 3yrs
Source: FE Analytics
The trust has ongoing charges of 0.97 per cent, and does not charge a performance fee.
"For a more diversified play, we like Pantheon International Participation IT which is very large, liquid and on a decent discount," continued Urquhart.
"We also like Electra Private Equity IT, which has a very flexible mandate and has been very opportunist in secondary purchases."
Both the Pantheon and Electra trusts are more expensive, with OCFs of 1.21 and 2.7 per cent, respectively.
Biotech Growth Trust
Peters is a big fan of Geoffrey C Hsu and Richard D Klemm’s £262m trust, which is his favourite option in the Biotech sector.
"I have a high regard for Geoffrey and the team, who have performed very strongly recently."
"The trust languished for some years when the sector was doing so well, but there’s been a big change in the asset class thanks to good operational performance from biotech companies and greater demand for M&A from the larger pharma companies like AstraZeneca and GlaxoSmithKline."
"It’s a large, liquid trust, and though the International Biotechnology Trust has beaten it recently, the Biotech Growth Trust has a better record over three, five and 10 years."
Performance of trusts vs index over 5yrs
Source: FE Analytics
Peters once again points out that the trust’s market has performed strongly, but does believe there is a lot going for the sector at the moment.
"If, like James Anderson, you think that technological advancement in healthcare will go up exponentially in the future, then this story could have a lot further to go. It’s just a question of what price you’re buying these companies at," he added.
The Biotech Growth Trust has ongoing charges of 1.29 per cent exclusive of performance fee, and is on a slight premium of 2 per cent.
Acorn Income IT
FE Alpha Manager John McClure’s Unicorn UK Income fund has proven popular readers for some time, but his trust is now also starting to gain traction, with two of our readers highlighting the sector-leading Acorn Income IT as one that they own.
Our data shows the small cap focused trust is the best performer in its IT UK High Income sector over a five-year period, with returns exceeding 200 per cent.
Peters rates McClure as a small cap manager, but sees the trust's small size and poor liquidity as a problem.
"It’s £34m in size and trades about £56,000 a day," he said. "What I’d say to your readers is that they might be better off investing in a larger, more liquid trust, because at least then you can sell out of it easily when you feel the time is right."
Acorn Income IT is on a premium of 3.8 per cent and has an OCF of 0.7 per cent, excluding performance fee.
Scottish Mortgage IT
James Anderson’s Scottish Mortgage IT is a favourite with retail investors, and so it is unsurprising that many of you highlighted this one.
Peters thinks it deserves its popularity as long as investors are prepared to put up with the volatility, and allays any fears surrounding lead manager James Anderson’s upcoming sabbatical, which is set to last for six months.
"I’m not worried at all," he said. "He’s not disappearing off the face of the earth and will be contactable."
"[Deputy manager] James Slater is very experienced in his own right, and is cut from the same cloth as James."
The Scottish Mortgage IT is one of the best-performing trusts in the IT Global Growth sector over the last decade, with returns of 274.24 per cent. It has beaten its FTSE All World benchmark by almost 140 percentage points in the process.
It has an OCF of 0.51 per cent and is on a discount of 3.2 per cent.
We’ll be looking at the companies investors are backing in their portfolios in an article later this week.
