Trusts thrive in Specialist Sectors

Investment trusts dominate in the Specialist Sectors and Assets and the Property categories in the Investment Adviser 100 Club.

Six out of the 10 members in the two categories are investment trusts, proving that the structure of trust vehicles is suited to investing in more alternative asset classes.

Within Specialist Sectors and Assets – which is broken down into financials, private equity, frontier markets, healthcare/biotechnology and technology – the only member to have been shortlisted for two consecutive years is the Allianz Technology Trust, previously the RCM Technology Trust.

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The Association of Investment Companies (AIC) reveals why the structure lends itself so well to the alternatives space. “Investment companies have tended to be the vehicle of choice in the alternative asset space due to the flexibility of the closed-ended structure,” the AIC explains.

“Managers do not have to sell illiquid stock to meet redemptions, which is hugely beneficial.”

In spite of this, it is the Polar Capital Healthcare Opportunities fund that has posted the highest return in Specialist Sectors and Assets in the past 12 months to May 26, generating a hugely impressive 44.38 per cent – well ahead of the average return in the category, which is 18.86 per cent, data from FE Analytics shows.

Within the 100 Club Property sector, the average return from the shortlisted funds and investment trusts in the past year was slightly higher at 22.47 per cent.

UK investors continue to place their money in bricks and mortar, with the Investment Association Property sector regularly appearing in the top-five, best-selling categories.

In April this year, the sector saw net retail sales of £265m, making it the third best-selling category that month.

The Schroder Real Estate Investment Trust is the only member to have been in the 100 Club Property category for two years running. Its performance figures seem to justify its inclusion in the 100 Club. In the five years to May 26, the investment trust delivered 125.34 per cent, while across three years to the same date it returned an equally impressive 114.63 per cent.

A sector breakdown in the fund’s latest factsheet reveals the portfolio has 42.1 per cent in offices, 36.2 per cent in retail property and 17 per cent in industrial. Yet again, three of the five shortlisted Property vehicles are investment trusts, demonstrating the structure is highly suited to alternative assets.

The AIC reports that in 2014 new issues in the investment trust space had a bias towards alternatives, in particular property, infrastructure, debt and leasing.

The final category in the 100 Club to fall under specialist assets is Absolute Return. The funds in this group are measured in terms of three-year performance as it’s still a fairly new product within the industry.

It has also been the subject of some controversy in recent years, which prompted the Investment Association to rename the sector Targeted Absolute Return following complaints that not all absolute return funds were delivering a return.