Finsbury Growth & Income, Invesco Perpetual Select UK Equity and Schroder UK Mid Cap are the top UK trusts for net asset value (NAV) returns over the last decade, according to the latest data from the Association of Investment Companies (AIC).
The three trusts are the only UK companies among the top 50 investment trusts with the highest NAV returns over 10 years to the end of July 2017.
Investment trusts have two key factors that make up their returns share price gains and by increasing its net asset value.
The NAV of a fund is essentially the amount of money investors would receive per share if all of the underlying assets owned by the fund were sold and distributed to the shareholders.
As such, NAV returns are the purest way to assess managers’ stock picking ability and in this series FE Trustnet looks at some of the funds with the highest NAV returns starting with the UK.
Finsbury Growth & Income
The top UK investment trust for net asset value returns is the five crown-rated Finsbury Growth & Income trust run by FE Alpha Manager Nick Train.
The £1.1bn trust has delivered a total return of 203.6 per cent over the last 10 years, placing it at the top of the IT UK Equity Income sector over the period and is more than three times the returns of the FTSE All Share, as the below shows.
Performance of trust vs sector and benchmark over 10yrs to 31 July 2017
Source: FE Analytics
With share price gains stripped out, the fund has returned 199.78 per cent from its underlying portfolio.
The highly concentrated portfolio has been run by Train since 2000, using an ultra-high conviction stockpicking approach with a focus on stocks with strong brands or franchises.
As such, the fund is invested in 26 stocks across just four sectors - consumer goods, consumer services, financials and technology.
Winterflood Investment Trusts analyst Keiron Drake noted said: “Nick Train has delivered impressive performance during his 16 years as manager of Finsbury Growth & Income and we rate him very highly.
“While the fund's performance following the US presidential election provided some indication of its vulnerability to rising inflation and interest rates over the short term, we believe that it will continue to outperform over the longer term,” he added.
“Although the fund has the lowest dividend yield in the UK Equity Income sector, dividend growth has been strong over a prolonged period and we would expect this to continue.
“The fund has consistently traded on a small premium since 2011 and, in our opinion, downside risk is alleviated by a proven discount/ premium control mechanism.”
The trust has a yield of 1.8 per cent and ongoing charges of 0.74 per cent, according to the AIC. It is currently on a 1 per cent premium to NAV.
Invesco Perpetual Select UK Equity
The second best UK investment company and top of the IT UK All Companies sector over the last decade is the fellow five-crown rated Invesco Perpetual Select UK Equity trust.
The trust has returned 167.42 per cent over the last decade to 31 July 2017, more than double the sector average and benchmark.
Performance of trust vs sector and benchmark over 10yrs to 31 July 2017
Source: FE Analytics
With share price gains stripped out, the fund has returned 168.57 per cent from its underlying portfolio.
Run by James Goldstone since 2016, the £70m trust was under the management of FE Alpha Mark Barnett for much of the above period.
Since Goldstone took over the fund it has been a third quartile performer returning 9.44 per cent in total returns – below the sector average (14.15 per cent) but above the market (8.18 per cent).
The manager favours companies with strong balance sheets, high barriers to entry and the ability to expand market share, believing that these traits help underpin long-term capital and income growth.
The trust makes up one quarter of the multi-asset Invesco Perpetual Select Trust alongside the Invesco Perpetual Select Balanced Risk, Global Equity Income and Managed Liquidity portfolios.
It is 35.8 per cent weighted to financials, with Barclays, Aviva, Lloyds, and Legal & General among the trust’s top 10 holdings.
The company is also 16.3 per cent in consumer services, 14.2 per cent in industrials and 12.2 per cent in consumer goods stocks.
The trust has a yield of 2.4 per cent and ongoing charges including performance fees of 1.36 per cent, according to the AIC. It is currently on a 1.4 per cent discount to NAV.
Schroder UK Mid Cap
The third and final UK trust in the top 50 investment trusts is the £182m Schroder UK Mid Cap. The investment company has been run by FE Alpha Manager Andrew Brough since 2003.
He was joined on the fund by former Hargreave Hale research analyst Jean Roche after former co-manager Rosemary Banyard left the firm last year.
Over the 10 years to the end of July, the fund has returned 161.06 per cent – the second highest in the IT UK All Companies sector. This is more than double the returns of the sector though it is 22.73 percentage points ahead of the FTSE 250 benchmark.
Performance of trust vs sector and benchmark over 10yrs to 31 July 2017
Source: FE Analytics
With share price gains stripped out, the fund has returned 159.17 per cent from its underlying portfolio.
The strategy is to invest in the mid-cap universe but with an element of leeway in investment remit to allow for a conviction-driven approach and an emphasis on specific companies and targeted themes.
The trust is 27.4 per cent invested in financials with a 24.3 per cent weighting in industrials and 21.9 per cent in consumer services.
It has a yield of 2.3 per cent and ongoing charges of 0.96 per cent, according to the AIC. It is currently on a 17.3 per cent discount to NAV.
Over the longer term, mid and small-caps are generally expected to outperform as the growth potential is higher, making the trust an unsurprising entrant in this list.
In an upcoming article, we will look at the UK smaller companies trusts that have made the largest NAV returns for investors.