Alternatives flourish in 2014

This article is part of
Winter Investment Monitor - December 2014

Investment trusts are often overlooked by investors in favour of their open-ended counterparts, but these types of vehicles can provide steady returns and income, as well as a means of portfolio diversification.

The latest figures from the Association of Investment Companies (AIC) on performance, inflows and new launches point to a number of trends in 2014.

According to the AIC’s data, the top-three investment trust sectors by performance in the period from October 31 2013 to October 31 2014 are Country Specialist: Asia Pacific, Property Direct – UK, and Sector Specialist: Biotechnology and Healthcare.

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The two best performing trusts in the Asia Pacific region over the period are India Capital Growth and New India, delivering impressive returns of 151.83 per cent and 141.86 per cent respectively.

Among the Biotechnology and Healthcare sector, the Biotech Growth and the Worldwide Healthcare trusts come top in performance terms.

Meanwhile, F&C UK Real Estate Investments and Schroder Real Estate delivers the best 12-month returns in the Property Direct – UK sector, with the Schroders trust clocking up healthy inflows of £57.37m in the period.

The top sector for new investment trust launches in 2014 to October 31 is Specialist Sector: Debt, which has four launches so far this year. The second most popular sector for launches is Infrastructure – Renewable Energy, which has clocked up two new issues.

Within these two sectors, the top performing investment trusts are Greencoat UK Wind, The Renewables Infrastructure Group (Trig), TwentyFour Income and Real Estate Credit Investments.

Annabel Brodie-Smith, communications director at the AIC, notes: “Alternative assets have proved popular in 2014, with the sectors focused on debt, infrastructure and property seeing more launch activity than any other sectors in the closed-ended space.

“Investment companies in these sectors tend to offer higher-than-average yields. As a result, these specialist sectors have been in high demand.”

James Carthew, research director at QuotedData, comments that with interest rates at such low levels, investors are still looking for steady income and this is where the investment trust sector has been able to hold its own.

He explains: “The range of choice offered by the investment companies market is much wider than it is for open-ended funds.

“Infrastructure investments, renewable infrastructure, long-term leases, property and structured debt and specialist finance are all areas that sit better in an investment company structure.”

For the investment trust industry, 2014 has been all about the rise of alternatives. But, as Ms Brodie-Smith cautions, “it should be remembered that investment in closed-ended companies is for the long term and sectors that are in vogue in 2014 might not be so in the future”.

Ellie Duncan is deputy features editor at Investment Adviser

India Capital Growth

Manager: David Cornell

Total assets: £53.1m

Launch date: December 2005


Country Specialists:

Asia Pacific

12-month perf: 151.83%

*Investor inflows: None

New India

Manager: Adrian Lim

Total assets: £197.7m

Launch date: December 2004


Country Specialists:

Asia Pacific

12-month perf: 141.86%

*Investor inflows: None

F&C UK Real Estate Investments

Manager: Ian McBryde