First, Fidelity is launching its China Special Situations trust, which is to be run by the estimable Anthony Bolton. Bolton, famed for the remarkable outperformance he brought to Fidelity's Special Situations fund, has been tempted out of semi-retirement by the Chinese venture - something he views as offering the greatest opportunity for the next 10 years. Investors, lured by the combination of the Chinese growth story and Bolton's legendary powers, are expected to put up $1 billion - around £630 million - in one of the biggest trust launches ever.
The relevance here is that Fidelity has opted for a closed-ended structure. This means that the trust can deploy a long-term strategy without the need - as is the case with open-ended funds - to sell off its assets to meet short-term spates of redemptions. In effect, this decision and the interest that the launch is attracting has put investment trusts squarely on the retail investor's radar.
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Our first table has scanned for less risky ITs, i.e. those that can show volatility of 15 per cent or less over the three years to 25 February. Lower risk is not sufficient by itself, of course, so we have applied a further filter stipulating that total return must be 15 per cent or more. These are the six ITs that made the cut for the more cautious investor's leaderboard.
Total Return from AIC Investment Companies universe
| Name | 3-yr cumulative performance to last price |
Yield | Share price (mid) |
3-yr Cumulative Ann.Volatility to Last Week End |
| Aberforth Partners - Geared Capital & Income Trust |
16.95 | 5.40 | 1.09 | 8.71 |
| Bluecrest Capital Management - Bluecrest Allblue |
56.72 | 0.00 | 1.58 | 14.54 |
| Capital Gearing Asset Mgmt - Capital Gearing Trust |
24.66 | 0.55 | 25.50 | 9.92 |
| HSBC Alternative Invest Ltd - HSBC Infrastructure |
22.97 | 5.52 | 1.17 | 18.28 |
| Ruffer LLP - Ruffer Investment Company |
63.69 | 1.67 | 1.80 | 8.19 |
| Stobart Group - Stobart Group |
22.73 | 3.94 | 1.02 | 11.59 |
Source: Financial Express. Data 25/02/2010
It is obvious here where the higher returns are to be found, and what the cost in volatility is. It is gratifying to note that the best return also delivered the lowest risk. The yields indicate how much income contributed to the TR.
Two further points may be helpful: the Bluecrest trust operates in the hedge fund sector, and its low correlation to equities could be of interest to those who remain wary of the stockmarkets. Then, while HSBC's offering does not qualify for ISA status in its own right, there are advisers and fund platforms that can bundle it up into a portfolio wrapper that does.
Next, we turn to trusts that generate income that is considerably in excess of what is available in your average high street savings account. We set our criterion as a yield of 20 per cent or more over the past three years, and five funds made the grade.
Total Return from UK AIC Investment Companies universe
| Name | 3-yr Cumulative Performance to Last Price |
Yield |
Share price (Mid) |
3-yr Cumulative Ann.Volatility to Last Week End |
| Alpha Real Capital - Alpha Pyrenees |
-55.91 | 20.50 | 0.30 | 42.96 |
| Carpathian PLC |
-82.95 | 32.66 | 0.15 | 72.83 |
| M&G Equity Investment |
9.86 | 67.65 | 0.09 | 14.33 |
| Treveria PLC |
-89.00 | 48.48 | 0.07 | 73.85 |
| Wichford PLC |
-61.04 | 36.78 | 0.09 | 67.41 |
Source: Financial Express. Data 25/02/2010
This collection is certainly generating high yields but, apart from M&G, and albeit that income is the name of the game, their shareholders would need to have a strong tolerance of the wildly volatile total returns. Investors should know also that while M&G's trust does as the name suggests, the others are all invested in property, in more or less exotic locations. Alpha focuses on France and Spain, Treveria specialises in Germany, Wichford adds the UK to its European mandate, and Carpathia trawls the Baltic, central and eastern fringes of the continent.
Those for whom this selection appears too narrow or knuckle-whitening might wish to contemplate our next table. We are still looking for income from some chunky yields, but now the level of volatility has been capped at 20 per cent.
Total Return from UK AIC Investment Companies universe
| Name | 3 year Cumulative Performance to Last Price |
Yield | Share price (Mid) |
3 year Cumulative Ann.Volatility to Last Week |
| Albion Income & Growth VCT |
-34.86 | 7.58 |
0.50 | 14.16 |
| Albion VCT PLC |
-20.78 | 7.25 | 0.69 | 16.97 |
| Harewood - UK High Income |
-25.00 | 12.00 | 0.63 | 15.28 |
| Baronsmead VCT 4 |
-6.89 | 8.62 | 0.81 | 8.56 |
| British Smaller Companies VCT |
0.26 | 6.62 | 0.76 | 12.58 |
Source: Financial Express. Data 25/02/2010
What stands out here is the predominance of Venture Capital Trusts, and this carries both good and bad news. The government's new-ish rules on VCTs constrain them to investing in small companies, probably at a pivotal stage in their development. Without a rigorous, down-and-dirty assessment of their candidate businesses, VCTs run the risk of backing a loser or two.
The good news is twofold: the VCT managers know this, and the investor gets a 30 per cent tax boost to their initial stake, then income and capital gains tax exemption thereafter.
Lastly, we come to the people who have the extended time horizon that can ride out storms for years to come. Unfazed by those Himalayan graphs, and with the whiff of immortality still lingering, these investors can afford to go for the big, risky bets.
For this gilded youth, or even the lost youth the future is global. These are the sectors which have shown themselves resilient and nimble, both riding through and emerging from the worst conditions we have witnessed for 80 years. Enquire within.
From UK AIC Investment Companies universe
Total Return Bid-Bid. Rebased in £ Sterling
| Sector name |
Return |
| IT Global Smaller Companies |
150.00 |
| IT Property - Direct Europe |
129.41 |
| IT Latin America |
126.23 |
| IT North America |
107.69 |
| IT Canadian Income Trusts |
107.47 |
Data from 31 Dec 2008 to 31 Dec 2009