Investors have long argued whether it is best to back a tried-and-tested manager who has shown strong performance over a long period of time or whether to look to the future and back promising new managers with less of a track record.
Those that prefer the tried-and-tested approach argue that there is sufficient evidence to see how well a manager has done in all markets conditions.
Indeed, a manager who has run a fund for more than 10 years will typically have seen it through a full economic cycle, so investors will get a good view of how well he has performed in both bull and bear markets.
Meanwhile, those against argue that some fund managers can begin to coast, living off the reputation created during the early years of their tenure.
Within the Association of Investment Companies (AIC), more than 50 per cent of investment trusts have had at least one manager at the helm for 10 or more years and nearly a quarter have had a manager running a fund for 20 or more years.
In this study, FE Trustnet goes to the top of the pile and looks at the longest-standing managers of AIC member companies to see how well they have guided their funds during the last decade to see whether they have continued to provide strong returns to investors.
Performance of trust vs sector over 10yrs
Source: FE Analytics
The longest-standing current manager of an investment trust is Peter Spiller, who has overseen Capital Gearing Trust for 36 years, with Spiller adding Alastair Laing and Chris Clothier as co-managers on the fund in 2011 and 2017 respectively.
Over the past decade the multi-asset portfolio has returned 100.42 per cent, beating its IT Flexible Investment sector by 55.42 percentage points.
The fund’s objective is to achieve absolute returns through active asset allocation across equities, bonds and commodities.
Spiller’s largest positions are a 39 per cent weighting to index-linked government bonds while 38 per cent of the portfolio is invested in funds and equities; 17 per cent is in preference shares and corporate debt.
Capital Gearing Trust is 0 per cent geared, has ongoing charges of 0.76 per cent and a yield of 0.5 per cent. Shares are trading at a 2.5 per cent premium to its net asset value (NAV), according to the AIC.
Up next is Simon Knott, who has run the five FE Crown-rated Rights & Issues Investment Trust for more than 30 years, taking over in 1984.
Over the last decade the small-cap fund has returned 320.93 per cent, significantly ahead of its FTSE All Share benchmark and IT UK Smaller Companies average peer.
A traditional value investor, the manager uses a bottom-up approach to stock selection and runs a concentrated portfolio of between 20 and 30 stocks.
Analysts at Kepler Partners said: “His main aim is to buy companies with strong balance sheets, attractive dividend yields and are trading a discount to what he deems to the business’ intrinsic value.”
However, investors should be warned that the trust tends to be volatile. Indeed, over the last decade it has had an average volatility of 30.81 per cent and a maximum drawdown – the most you could have lost in a month – of 70.19 per cent – both bottom quartile figures.
Data from the AIC shows that Rights & Issues Investment Trust has charges of 0.45 per cent and a yield of 1.4 per cent while its shares are trading at a 9.1 per cent discount to its NAV.
Performance of trust vs sector and benchmark over 10yrs
Source: FE Analytics
The next longest-serving managers both run UK equity income strategy Value & Income Trust: Angela Lascelles and Matthew Oakeshott. The pair have overseen the fund for nearly 32 years (since 1986).
The last decade has been a prosperous one for investors, as it has made a total return of 164.76 per cent against the FTSE All Share benchmark’s 110.49 per cent.
The fund invests primarily in equities and property in the UK with Lascelles looking after the equity portfolio and Oakeshott running the property portfolio.
The managers have produced 30 consecutive years of dividend growth and the trust currently yields 4.2 per cent.
The fund employs gearing, which is currently at 28 per cent and its shares are trading at a 19 per cent discount to its NAV.
It is worth noting that the fund announced it will give shareholders a full liquidity event in March 2027, allowing investors to sell shares at NAV.
In reaction to this news last years, analysts at Winterflood Research said: “We would expect its discount to narrow over the next 10 years, which would provide a helpful tailwind to share price performance for investors willing to take a long‐term view.”
Value & Income Trust has ongoing charges of 1.46 per cent and also a performance fee of 10 per cent of any outperformance over the benchmark.
Moving down the list, Hugh Young has run the Asia-focused Aberdeen New Dawn Investment Trust for 29 years (since 1989).
While it has been a good long-term fund, indeed it is up 813.95 per cent since 2001 for example, the fund has struggled over the last decade, returning 163.7 per cent – a bottom quartile return in the IT Asia Pacific ex Japan sector, although still ahead of its MSCI AC Asia Pacific ex Japan index.
It uses 8 per cent gearing and its shares are currently trading at a 13.9 per cent discount to its NAV according to the AIC.
The trust invests in equities throughout the Asia Pacific region with the exception of Japan and has a policy not to invest more than 15 per cent of the fund in other listed investment companies.
It has the highest allocation to China of 16.5 per cent, although this does not include popular tech names Alibaba and Tencent and is an underweight of 14 percentage points to the benchmark.
The next highest allocation is to Singapore (16.1 per cent), which is 12.5 percentage points overweight the index, followed by Hong Kong (15.9 per cent) and India (13 per cent), both of which are also overweights.
Aberdeen New Dawn Investment Trust has ongoing charges of 0.93 per cent and a yield of 1.7 per cent.
Performance of trust vs sector and benchmark over 10yrs
Source: FE Analytics
Finally, the fifth longest-tenured manager is James Henderson, who has managed equity income trust Lowland Investment Company for 28 years (since 1990).
Joined by co-manager Laura Foll in 2016, the trust has been a top quartile performer over the last 10 years, returning 205.87 per cent.
It has an objective to provide both capital growth and income and invests almost exclusively in the UK with big names such as Royal Dutch Shell, HSBC, Prudential, Standard Chartered, GlaxoSmithKline and BP dominating its top holdings however it actually takes a multi-cap approach with a more mid- and small-cap bias.
The investment process involves generating ideas internally and externally which equates to roughly 2,500 stocks being looked at. These are subject to a quantitative screening followed by a qualitative analysis to create the portfolio with 123 names held in total.
Charles Cade, head of investment companies research at Numis Securities, said: “We believe that Lowland is an attractive vehicle and is clearly differentiated from its UK Income Peers by its mid/small cap bias and contrarian approach.”
The fund’s shares are trading at a 7 per cent discount to its NAV. It uses gearing, which is currently at 13 per cent. Investors should be aware of the 15 per cent performance fee on top of the 0.59 per cent ongoing charges, according to data from the AIC.