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The most consistently top-performing trusts over the last decade

23 May 2017

Research from the AIC has found that one-quarter of the consistently top closed-ended vehicles over 10 years have a UK focus, while a further 25 per cent have a global remit.

By Lauren Mason,

Senior reporter, FE Trustnet

Lindsell Train, F&C Smaller Companies and Electra Private Equity are the three most consistently top-performing investment trusts over the last decade, according to research from the AIC.

Within the list of 20 most consistent closed-ended investment vehicles over 10 years, 25 per cent of them are in the IT Global sector and a further 25 per cent have a UK focus. 

The list of trusts, which is shown below, was compiled through ranking discrete annual returns and outperformance relative to the overall average investment company.

In the case that two trusts achieved the same score, the AIC differentiated between them using their standard deviation, or volatility of returns, over this time frame.

 

Source: The AIC

Top of the list is Lindsell Train, which has five FE Crowns and has been headed up by star managers Nick Train (pictured) and Michael Lindsell since 2001.

The trust, which is trading on a 28.1 per cent premium, has achieved a higher total return than the overall weighted average during nine out of the last 10 years. It has also quadrupled the total return of the average trust over the last decade with gains of 425.21 per cent to the end of April.

The £162m trust also boasts the lowest volatility of return out of all 20 vehicles on the list.

Michael Lindsell, joint founder of Lindsell Train, said the trust’s performance has partially been driven by the team’s process of adopting a highly-concentrated, low turnover portfolio of companies they deem to be “exceptional”.

“These have contributed to the trust’s long-term performance, but not as much as the stake in our fund management company, Lindsell Train Limited which has been the key driver behind the trust’s very strong performance record,” he explained. “We like this close alignment with the trust’s shareholders, who have shared in the success of our business.”


While he warns that the trust’s hefty premium to NAV is unlikely to be sustainable and is therefore particularly vulnerable to any decline in the price of individual holdings, he remains positive about the prospect for the trust’s companies.

“With so much debate within the investment community about interest rates, inflation, Brexit and Trump (none of which we spend much time dwelling on), it seems to be as good a time as any to shelter under the umbrella of a collection of companies with such strong fundamentals,” he added.

Also in the IT Global sector, and the next trust on the list, is F&C Global Smaller Companies. Managed by Peter Ewins, it is trading on a 1.3 per cent premium to NAV and is currently 4 per cent geared.

As with Lindsell Train, AIC research shows it has outperformed its overall weighted average during nine of the last 10 years. It has almost doubled the performance of the overall weighted average investment company with a total return of 199.67 per cent. While it has struggled to outperform its sector average year-to-date, it has comfortably outperformed it over three, five and 10 years.

Performance of fund vs sector and benchmark over 5yrs

 

Source: FE Analytics

Commenting on the trust’s performance, Ewins said: “The past decade has been a great period to be overweight small-cap equities. The asset class has done well despite the economic downturn around the global financial crisis, and other economic and political challenges along the way.

“We believe that many small-caps have been re-rated in recent years as they have demonstrated an ability to cope with tough economic times, while at the same time delivering premium growth through the cycle. The investible universe we have to look at is wide and dynamic, with new companies listing all the time.”

The manager adopts a bottom-up approach to stock selection and actively avoids firms which he deems to be “over-hyped” or that lack a sustainable competitive edge. He also holds collective instruments and holds his largest portfolio weightings in the likes of Eastspring Investments Japan Smaller Companies, Aberdeen Global Japanese Smaller Companies and Scottish Oriental Smaller Companies investment trust.

Other trusts in the IT Global sector to have made it onto the AIC’s top 20 list include Mid Wynd International, Martin Currie Global Portfolio and JP Morgan Elect Managed Growth.

Elsewhere, a number of UK-focused investment companies have also achieved consistently strong returns over the last decade to the end of April.

Invesco Perpetual Select UK Equity is high on the list for its outperformance of the overall weighted average investment company during eight out of the last 10 years. In total, it has achieved a return of 183.26 per cent compared to the average company’s return of 100.36 per cent to the end of April.


The five crown-rated trust is headed up by James Goldstone and aims to provide long-term total returns through companies with strong balance sheets, high barriers to entry and the ability to expand market share.

The £81.8m trust has significantly outperformed its sector average and benchmark over three, five and 10 years. It is 17 per cent geared and is trading on a 2.3 per cent discount to NAV.

Performance of fund vs sector and benchmark over 5yrs

 

Source: FE Analytics

Nick Train’s Finsbury Growth & Income trust and Jonathan Brown and Richard Smith’s Invesco Perpetual UK Smaller Companies have also managed to outperform the average overall investment company during eight out of the last 10 years. Threadneedle UK Select trust made it onto the list for outperforming over seven years.

A total of seven trusts managed to retain a position within the top 20 from last year: Allianz Technology, F&C Global Smaller Companies, Finsbury Growth & Income, Invesco Perpetual UK Smaller Companies, JP Morgan American, JP Morgan US Smaller Companies and Schroder Oriental Income.

Annabel Brodie-Smith, communications director at the AIC, said: “It’s important for investors to remember that performance is only one factor to consider when researching investment companies and they also need to look at other criteria including portfolio composition, gearing, discounts and charges. Investors usually focus on the latest top performers but consistent long-term past performance is key when considering an investment. 

“The investment company industry has a total of 55 sectors, so there is a wide range to choose from and 12 of these are represented in the top 20 most consistent performers.

“After all the political surprises of the last year it’s interesting to see the Global sector dominate this year and UK-focused investment companies continue to feature strongly.”

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.