IA 100 Club  

IA 100 Club: Investment trusts return to form

IA 100 Club: Investment trusts return to form

The number of investment trust members in the 2017 Investment Adviser 100 Club has risen sharply, with 18 vehicles making this year’s shortlist.

In the 2016 Club the number had fallen to 12, compared with 19 in 2015, after several trusts focused on Japan, emerging markets and UK smaller companies dropped out. 

However, investment companies have returned to form following a year of strong equity returns. The average investment company has delivered 27 per cent over the past year, data from the Association of Investment Companies (AIC) shows.

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Closed-ended funds still retain their stronghold on the UK Equity Income category with three funds in 2017, the same number as last year. 

But the names making the grade this year are completely different (see Page 17). 

Some 10 investment companies in the UK Equity Income space have increased dividends consecutively for 20 years or more, AIC figures show, a factor gaining traction with intermediaries and thereby giving a boost to trusts that perform well.

One area of significant change is in Property. Investment trusts dominate the category in the 2017 shortlist, after what was a difficult period for their open-ended peers. 

July 2016 saw the gating of several of the commercial property Oeics, with a knock-on effect on performance as valuations bore the brunt of the resultant instability and Brexit uncertainty.

Taliesin Property, the only closed-ended vehicle in the category last year, retains its place and is joined by the Picton Capital Property Income and VinaCapital Vinaland trusts.

The situation has reignited the debate over the suitability of the open-ended structure for an investment as illiquid as property. 

While Oeic managers will highlight how well investors were protected, the FCA and Bank of England have begun studying the space in more detail.

Annabel Brodie-Smith, communications director at the AIC, says: “It’s not surprising that investment companies continue to feature strongly in the Property and UK Equity Income sectors as the structure has clear benefits in these areas.

“This has been clearly demonstrated by the strong performance of property investment companies in comparison to the problems suffered by the open-ended property sector last year.”

But it is the ground made in the traditional equity space that is behind the sharp rise in the number of closed–ended vehicles in the 2017 100 Club. 

In the 2016 shortlist, the Japanese and European Equity categories contained no investment companies, while UK Smaller Companies only had one, from Invesco Perpetual. However, this year BlackRock Smaller Companies and the Rights and Issues trust have entered the UK small-cap group.

In Japan, the Baillie Gifford Japan Trust and Schroder Japan Growth join the category, while Janus Henderson’s John Bennett and Ollie Beckett see their value and small-cap trusts enter the European space. 

There are now two trusts in the Global Equity category, up from one, with the Baillie Gifford duo Edinburgh Worldwide and Scottish Mortgage joining three open-ended vehicles.

“It’s encouraging to see more investment companies from the Japan and UK Smaller Companies sectors enter the Investment Adviser 100 Club,” Ms Brodie-Smith says.