Investment Trusts  

Biotech investment trust sector comes top over 18 years

Biotech investment trust sector comes top over 18 years

Biotechnology and Healthcare was the best-performing investment trust sector over the past 18 years, up 1,313 per cent, data has shown.

Country Specialist: Asia Pacific was up 1,280 per cent over the same period, making it the second best performing sector, according to data from the Association of Investment Companies (AIC), which pointed out Isas were nearly 18 years old.

But Scott Gallacher, chartered financial planner at Rowley Turton, warned the figures were “misleading”.

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He said the Sector Specialist: Biotechnology and Healthcare sector had not delivered consistent performance and that it was a better medium-term investment “if you get in at the right time”.

“If you bought in at the peak in [December] 2000 you won’t have anything like that kind of return. You would have done no better than the average investment trust global fund, which has done 230 per cent,” Mr Gallacher pointed out.

“Last time it [the sector] did so well in the late 1990s it then had a massive crash.

The problem is with that sector, most people weren’t in it at the boom, they bought at the peak,” he added. 

Annabel Brodie-Smith, communications director at the AIC, said: “It’s clear that investors in some of the top-performing investment company sectors have been rewarded for their patience over the long-term. 

“In some sectors investors have needed bags of patience, as demonstrated by the volatility of the Global Emerging Markets sector in recent years, but their investment has paid off over the long term.”

Discrete performance data showed the Global Emerging Markets sector experienced volatility over the past five years but it was still up 805 per cent over the last 18 years, placing it behind the Asia Pacific sector.

Mr Gallacher expressed concern not many investors would have the risk tolerance nor the patience to invest via an Isa in these sectors.

Ms Brodie-Smith said: “Everyone has different ideas about what constitutes ‘long-term’ – in fact our own investor confidence research this year found that 8 per cent of active investors consider three to five years a ‘long-term’ investment horizon.

“Whereas we consider long-term investments to be at least five years and preferably longer.”

Smaller companies across a range of regions also featured strongly in the AIC’s top-performing sectors.

Mr Gallacher added: “I’m not sure if I was an Isa investor today I would be putting all my money into the biotech sector.”

Top performing investment company sectors over 18 years - % share price total return

Performance from28/02/199929/02/201228/02/201328/02/201428/02/201529/02/2016
Performance to28/02/201728/02/201328/02/201428/02/201529/02/201628/02/2017
Duration (years)1811111
Overall Weighted Average investment company388.9116.0710.629.77-4.1826.97
AIC sector      
Sector Specialist: Biotechnology & Healthcare1313.0531.1546.8734.14-10.1733.44
Country Specialists: Asia Pacific1279.8115.11-0.4737.06-10.1949.15
Global Emerging Markets804.9710.55-17.4511.55-18.5645.04
Asia Pacific - Excluding Japan794.0322.16-13.5220.67-12.9740.82
European Smaller Companies625.3624.6837.18-0.6111.7824.43
North American Smaller Companies555.5530.3114.0512.355.8728.74
UK Smaller Companies520.1528.9947.1-7.673.6420.58
Private Equity506.7130.039.4110.55-2.3843.68
UK All Companies456.0725.4332.56-3.010.5317.42

Source: AIC