InvestmentsMar 12 2012

Investment trusts pack a potent punch

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ByRebecca Clancy

As a result, those investors that use the vehicles naturally revert to the biggest products available. The larger trusts are also traditionally the ones that have been around the longest, with a suitable track record to attract investors.

Big, however, is not always better. Private equity trust 3i, the biggest investment trust in the UK at £2.8bn, is fourth quartile over the past five years, recording a loss of 77 per cent, compared with its sector, which is down 10.2 per cent.

In fact, of the 10 biggest trusts in the UK only two are top quartile, including the £2.1bn Templeton Emerging Markets investment trust, which has returned 104.8 per cent in the past five years, compared with the Global Emerging Markets sector, which has returned 58.8 per cent, according to Morningstar.

The £1.9bn Scottish Mortgage trust is also top quartile, having returned 39.4 per cent in the five years to February 23, compared with the Global Growth sector, which has returned 14.7 per cent over the same period.

However, while half of the biggest 10 trusts sit in the Global Growth sector, only one in the sector is among the top 10 performers in the past five years.

That fund is the £259.8m Ruffer Investment Company, which has returned 91.6 per cent over the past half decade, making it the 10th best performing trust in that time frame.

Over five years, the top two performing trusts sit in the Asia Pacific excluding Japan sector.

The £183.2m Scottish Oriental Smaller Companies trust tops the list, having returned 133.8 per cent in the five years to February 23, compared with its sector, which returned 69.6 per cent, according to Morningstar.

The £222.7m Aberdeen Asian Smaller Companies follows in second with a return of 122.7 per cent over the same time frame.

Jackie Beard, director of closed-end fund research at Morningstar, says the outperformance of Asia excluding Japan trusts is hardly a shock.

“Seeing Asian smaller companies and/or emerging markets feature through several funds is not surprising. That is where the growth opportunities have been.”

Charles Cade, head of investment trusts at Numis Securities, adds the success of the Asia-focused trusts reflects the strong performance of the asset class, which he expects to continue in 2012.

“Interest rates are now falling or appear close to a peak in many emerging economies, and we expect a recovery in emerging markets and Asian equities in 2012,” he explains.