The top-performers list across the IMA UK Equity Income and IMA UK All Companies sectors was dominated by those in the latter, but looking at closed-ended vehicles, those in the IT UK Growth & Income and IT UK High Income sectors come out on top.
Industry professionals pointed to UK growth funds’ greater exposure to the small and mid cap market as the reason for their superior performance, but the same trend is not evident among investment trusts.
Top-12 best-performing UK equity trusts over 10yrs
| Name | 10yr return (%) | IT Sector |
|---|---|---|
| Acorn Income | 566.95 | UK High Income |
| Schroder UK Mid Cap | 428.04 | UK Growth |
| Artemis Alpha | 317.35 | UK Growth |
| Finsbury Growth & Income Trust | 313.4 | UK Income & Growth |
| Keystone IT | 270.06 | UK Growth |
| Hansa Trust | 244.16 | UK Growth |
| Perpetual Income and Growth Investment Trust | 243.3 | UK Income & Growth |
| Lowland Investment Company | 240.08 | UK Income & Growth |
| The Mercantile Investment Trust | 226.24 | UK Growth |
| Temple Bar Investment Trust | 220.3 | UK Income & Growth |
| Small Companies Dividend Trust | 212.32 | UK High Income |
| Edinburgh Investment Tst | 212.26 | UK Income & Growth |
Source: FE Analytics
Among the highest profile of those that made it on to the list are FE Alpha Manager Nick Train’s Finsbury Growth & Income Trust, and FE Alpha Manager Mark Barnett’s Perpetual Income & Growth trust.
However, number-one over the period is the little-known Acorn Income trust, which has delivered 566.95 per cent – the highest figure by well over 100 percentage points. It is headed up by FE Alpha Manager John McClure and is only £38.4m in size.
Performance of fund vs benchmark over 10yrs
Source: FE Analytics
The fund is one of the very few income-focused investment trusts that has a slant towards small caps. It has a great deal of crossover with McClure’s Unicorn UK Income fund, but has a much longer track record. Indeed, it has the longest track record of any small or mid cap focused equity income vehicle across both the open- and closed-ended universes.
Investment trust expert Peter Walls (pictured), who heads up the Unicorn Mastertrust, says investors need to be a little careful when looking at the share price performance of UK equity income trusts because their discounts have closed significantly.
"You’ve got to take these figures with a pinch of salt because the average discount for a UK equity income trust was a lot higher then than it is now," he said.
"There hasn’t been a great deal of movement in the discounts of UK growth trusts, but you’ve seen a lot of UK equity income discounts disappearing, and small premiums coming in to play."
"A big change in the discount can make a dramatic difference to returns, so you’ve got to be a bit careful," he explained.
Walls adds that the IT sectors themselves are quite misleading, and that investors need to look at investment trusts individually rather than by sector. He points out that the Capital Gearing IT – a mixed asset portfolio – sits in the sector, as well as Barnett’s Keystone IT, which can claim to be a UK equity income trust in its own right, given that it is yielding more than 3 per cent.
Nevertheless, Walls says he is wary of a lot of the trusts in the IT UK Growth & Income sector at the moment because they are on premiums, which does not fit in with his value approach. He believes investors should not necessarily expect UK equity income trusts to fare as well as they have done over the next 10 years, especially on a total return basis, given where discounts and premiums are at the moment.
Over the last 10 years, the trend in the global investment trust sectors has been far more in keeping with the one seen in the open-ended universe, with the top-performers list dominated by trusts in the IT Global Growth sector.
Top-10 global trusts over 10yrs
| Name | 10yr (%) |
|---|---|
| F&C Global Smaller Companies | 451.35 |
| Murray International Trust | 332.87 |
| Lindsell Train IT | 288.49 |
| Jupiter Primadona Growth | 277.24 |
| Scottish Mortgage Investment Trust | 259.92 |
| Law Debenture Corporation | 237.96 |
| British Empire Securities & General Trust | 204.3 |
| Henderson Global Trust | 203.58 |
| Mid Wynd International IT | 203.46 |
| The Cayenne Trust | 197 |
Source: FE Analytics
Only Bruce Stout’s Murray International Trust made it into the top-10, second to the F&C Global Smaller Companies trust. The second-best performer in the income-focused sector has been the Midas Income & Growth trust, which was well off the pace, with returns of 183.3 per cent.