Caledonia Investments, Schroder Oriental Income and Henderson Smaller Companies are among some of the top yielding trusts over the past 10 years, according to research by investment platform AJ Bell.
To identify the trusts AJ Bell compared the current yield to the share price of each trust at the point of investment 10 years ago.
As such, it found 21 trusts with a yield of 6 per cent or more, based on 2008 share prices, and 12 with a yield of 7 per cent or more.
Top 10 trusts by income
Source: AJ Bell & AIC
According to AJ Bell, £100,000 invested a decade ago in the 10 highest yielding trusts today would be worth more than £280,000 and paying out an annual income of £8,130.
Laura Suter, personal finance analyst at AJ Bell, said: “The figures show that investors often have to decide between jam today and jam tomorrow, with income often coming at the price of lower capital growth, or vice versa.
“That said, even the lowest yielding trusts have proven their ability to hand investors a reliable and growing income each year for at least 10 years, making them particularly attractive for those using the pension freedoms in retirement relying on the income to fund their lifestyle.”
She added: “Investment trusts are particularly suited to providing steady income for investors, as their structure enables them to withhold up to 15 per cent of the income they receive each year in order to be used in future years when dividends may be lower.
“The longer-term nature of the closed-end structure of investment trusts mean that managers can also invest for the long term and ride out market volatility, without being forced to sell by investor redemptions.”
Below FE Trustnet explores AJ Bell’s top yielding closed-end funds in more detail.
British & American Investment Trust
Sitting at the top of the yield table over the past decade is the £18.8m British & American Investment Trust with a yield of 10.4 per cent over its 2008 share price.
“This trust is the only one whose share price has actually fallen during that 10-year period, which will have enhanced the 10-year yield figure,” AJ Bell analysts noted.
“Even with this share price fall, the effect of dividends over the past 10 years means investors selling today who had reinvested dividends, would still be up more than 139 per cent [to the end of June] over that period on a total return basis.”
The equity income trust, managed by Jonathan Woolf, invests in UK and US-listed companies and aims to achieve a balance of growth in income and capital “in order to sustain a progressive dividend policy”.
Performance of trust vs sector & benchmark over 10yrs
Source: FE Analytics
Over the past decade the trust has delivered a total return of 129.23 per cent compared with a 132.79 per cent gain for the average IT UK Equity Income peer and a 118.95 per cent return for the benchmark FTSE All Share index.
British & American has a current annual yield of 11.7 per cent, has ongoing charges of 7.49 per cent, is 130 per cent geared and is trading at a premium to net asset value (NAV) of 94.9 per cent, according to the Association of Investment Companies (AIC).
Schroder Oriental Income
Next on the list is Matthew Dobbs’ £632.7m Schroder Oriental Income trust, with a yield of 9 per cent over 10 years.
The trust invests in companies based in or deriving a significant proportion of revenues from the Asia-Pacific region and which offer attractive yields.
Top holdings include Taiwan Semiconductor Manufacturing, HSBC, Korean firm Samsung Electronics, Singapore’s Fortune Real Estate Investment Trust and conglomerate Swire Pacific.
Over 10 years, the trust has delivered a total return of 296.98 per cent, compared with a 249.41 per cent gain for the average IT Asia Pacific Excluding Japan trust and a 164.99 per cent return for the MSCI AC Pacific ex Japan index.
Schroder Oriental Income is currently trading at a discount of 2.7 per cent to NAV, is 8 per cent geared, has ongoing charges (including performance fee) of 1.95 per cent, and has a current yield of 3.9 per cent.
Henderson Far East Income
Another Asia-Pacific trust making the list is Henderson Far East Income, which has a yield of 8.9 per cent over 10 years.
Managed by Michael Kerley, the £448.1m trust has a similar remit to the Schroder Oriental Income trust, albeit with greater exposure to Chinese companies.
Its largest holdings include Chinese banks Industrial &Commercial Bank of China and China Construction Bank, UK-listed miner BHP Billiton, Macquarie Korea Infrastructure Fund, and hydroelectric company China Yangtze Power.
Over 10 years the trust has delivered a total return of 170.32 per cent compared with a gain of 249.41 per cent for the average IT Asia Pacific Excluding Japan trust.
Henderson Far East Income is trading at a 0.5 per cent premium to NAV, is 2 per cent geared, has a current dividend yield of 5.9 per cent, and ongoing charges of 1.12 per cent.
Caledonia Investments
The fourth closed-end fund on the list by yield is Caledonia Investments, a global equity trust with a yield of 8.6 per cent over 10 years.
The £1.6bn trust aims to grow net assets and dividends over the long term by investing in “proven well-managed businesses that combine long-term growth characteristics with an ability to deliver increasing levels of income”.
Top holdings in the trust include asset manager Seven Investment Management, Belgian investment firm Cobehold, manufacturer Cooke Optics, Gala Bingo and care home provider Choice Care Group.
Performance of trust vs sector & benchmark over 10yrs
Source: FE Analytics
Over 10 years, the trust has generated a total return of 88.71 per cent compared with a 190.58 per cent gain for the average IT Global trust and a 118.95 per cent return for the FTSE All Share benchmark index.
Caledonia Investments is trading at a 19.3 per cent discount to NAV, is not geared, has a current yield of 2 per cent, and ongoing charges of 1.22 per cent, according to the AIC.
Henderson Smaller Companies
Lastly is another Henderson investment trust – Henderson Smaller Companies – which has a yield of 7.9 per cent over 10 years.
Investing lower down the UK market-cap scale, manager Neil Hermon has delivered a total return of 391.63 per cent over the past decade compared with a gain of 290.51 per cent for the average IT UK Smaller Companies trust and a 234.98 per cent gain for the Numis Smaller Companies Excluding Investment Companies index.
Top holdings include housebuilder Bellway, asset manager Intermediate Capital Group, engineering company Renishaw and polymer manufacturer Victrex.
Henderson Smaller Companies is currently trading at a 12.4 per cent discount to NAV, is 9 per cent geared, has a current yield of 2.3 per cent, and ongoing charges (including performance fee) of 0.98 per cent, according to the AIC.