Closed-ended funds show their resilience

This article is part of
Investment Adviser 100 Club - July 2016

Closed-ended funds show their resilience

This year, the number of investment trust members in the Investment Adviser 100 Club has fallen to 12, down from 19 in 2015.

Investment trusts’ showing in the elite club of outperforming funds had remained steady at 19 for the past two years. But those that feature in the 2016 Club are concentrated once more in the Specialist Sectors and Assets category, which boasts three closed-ended funds. The last time closed-ended funds dominated in this category was back in 2014, before they moved into more mainstream categories last year.

The UK Equity Income category also has three investment trust members this year.

In all, trusts are represented across eight categories in the 100 Club, including Asia Pacific Equity, Global Equity and Mixed Asset.

Jemma Jackson, PR manager at the Association of Investment Companies (AIC), notes: “We’ve always said that while investment companies will tend to deliver tangible outperformance over the long term, we’d expect a bumpier ride along the way – not least due to the magnifying effects of gearing, and discount widening in some cases, too.

“So after a less-than-straightforward year for equities, it’s not surprising to see fewer investment companies featuring this year.

“That’s not to say there hasn’t been some strong performance,” she adds. “[AIC] Japanese Smaller Companies are leading the pack over the last 12 months, while we have also continued to see spectacular performance in the [AIC] Property Specialist sector.”

There is one investment trust member in the 100 Club Property category this year, Taliesin Property, which is also the first time this trust has made it into the list.


12: Number of investment trusts in this year’s 100 Club

5: Number of investment trusts in the list for the first time

8: Number of categories with at least one investment trust member

In recent weeks, open-ended property funds have hit headlines as they moved to deter investors from making significant withdrawals in the wake of the UK’s decision to leave the EU.

But as Ms Jackson points out: “While specialised property funds appear to have shrugged off ‘Brexit’ due to their [idiosyncratic] remits, the closed-ended structure will always come into its own during times of market volatility – investment companies are always, in essence, open for business.

“Other specialist sectors we have seen perform well over the past year include Infrastructure, and the Environmental sector is well into double-digit returns, too.”

Of the 12 investment trusts in the list in 2016, five are making their debut. In addition to Taliesin Property, Independent Investment Trust in the Global Equity category is a member for the first time. BlackRock Frontiers Investment Trust, Polar Capital Global Healthcare Growth and Income, and Electra Private Equity are also first-time entrants to the 100 Club.

Investment trusts have historically performed well in the UK Equity Income category, and the same is true this year. This year’s members are The Diverse Income Trust, Finsbury Income and Growth Trust and Troy Income and Growth Trust.