Trusts trounce open-ended peers

In the past year equity markets have been somewhat volatile, yet many have produced the best returns seen for decades.

In North America the S&P 500 index closed above the 2,100 mark for the first time in February, while the FTSE 100 index soared past the 7,000 mark in the same month. The FTSE has since fallen back, although it still hovers around this milestone.

So how has this affected the 100 Club equity members? The nine equity categories are broken down into both regions and styles, comprising Global Equity, Global Emerging Markets, North American Equity, European Equity, Japanese Equity, Asia Pacific Equity, UK Equity, UK Equity Income and UK Smaller Companies.

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For the five years to May 25 the average performance of seven of the nine categories has outperformed the average returns of both the relevant Investment Association and Association of Investment Companies sector averages. Meanwhile, the European and Japanese equity members have produced five-year average returns that beat the open-ended sector averages but fall short of the investment trust peer group returns.

This highlights one of the key performance findings of the Investment Adviser 100 Club equity members, and the importance of the Club’s focus on comparing open-ended and closed-ended vehicles.

Of the eight equity categories that included investment trusts as a member – the UK equity income category only holds open-ended funds – seven of these saw an investment trust member top the category on five-year performance.

While the Global Emerging Markets category saw its sole investment trust member sit in third place, in categories such as Japanese Equity, the top three members were the three investment trusts over five years.

More importantly perhaps is the fact that the closed-ended vehicles are not just topping the lists but also significantly outperforming their open-ended counterparts.


Japanese equities in general have benefited from the boost to quantitative easing in October 2014 and the commitment of Japan’s government and its central bank to turning the economy around.

It is therefore not surprising the average return of the Japanese equity category for the past year is the highest among the 100 Club equity categories at 38.14 per cent, with Global Equity members trailing in second place with a return of 24.7 per cent, according to data from FE Analytics.

In the category itself the best performing members have been investment trusts, with the Baillie Gifford Japan Trust managed by Sarah Whitley topping the list across three, five and 10 years to May 25, while the Schroder Japan Growth trust slipped into the top spot for the 12-month period.


But it is the disparity between the open- and closed-ended returns that is surprising. For the five years to May 25, the Baillie Gifford Japan Trust has returned 167.24 per cent, according to FE Analytics, while the best performing open-ended member, the CF Morant Wright Nippon Yield A share class, produced a return of 67.62 per cent, almost 100 percentage points behind.