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The 20 best-performing investment trusts over the last decade

Consistency of performance can be more meaningful to investors than a one-off ‘shoot the lights out’ success, says the industry body for investment companies - more commonly called investment trusts.

With this in mind, the Association of Investment Companies has analysed all investment trusts to find the 20 most reliable and strongly-performing contenders of the last decade.

The UK Smaller Companies sector closely followed by Asia Pacific excluding Japan dominate the league table (see full list below).

Top of the league: AIC analysed investment trusts to find the 20 most reliable and strongly-performing contenders of the last decade

Investment trusts are a popular choice among savvy investors - there is no initial charge and smaller annual fees mean they eat up much less of your returns than funds. And they often outperform their fund counterparts, while carrying a slightly higher degree of risk and volatility.

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Seven out of 20 of the best and most dependable investment companies were from the UK Smaller Companies investment company sector, while five were from the Asia Pacific excluding Japan sector. Six of the 20 were managed by Aberdeen Asset Managers.

WHAT ARE INVESTMENT TRUSTS?

Investment trusts are listed companies with shares that trade on the stock market.

They invest in the shares of other companies and are known as closed end, meaning the number of shares or units the trust's portfolio is divided into is limited - unlike unit trusts or open-ended investment companies (OEICs) where investors' money is pooled to invest in shares, bonds or other funds.

In an investment trust, investors can buy or sell shares to join or leave the fund, but new money outside this pool cannot be raised without formally issuing new shares.

Investment trusts can be riskier than unit trusts/OEICs because their shares can trade at a premium or discount to the value of the assets they hold, known as the net asset value.

For example, a trust's price can fall below the total value of its holdings if it is unpopular and people do not want to invest but do want to sell. This pushes down demand and drives up the supply of its units for sale.

This gives new investors the opportunity to buy in at a discount, but means existing investors' holdings are worth less than they should be.

Investment trusts tend to be a lower-cost option than funds, with no initial charge and lower annual fees. However, buying them incurs share-dealing charges. A good DIY investment platform will cut these.

Scottish Oriental Smaller Companies was found to be the strongest and most consistent AIC member investment company of the past decade.

A £100 lump sum investment into the company has grown to £875 and it has outperformed the average investment company in nine of the past 10 years.

The trust was managed by Susie Rippingall for over a decade until her retirement on 1 April, and it is now managed by Wee-Li Hee, Scott McNab and Angus Tulloch.

The runner-up was from the Global Growth sector - F&C Global Smaller Companies, managed by Peter Ewins.

A £100 lump sum in the fund over the past decade has grown to £654, and the company has outperformed the average investment company in nine of the past 10 years.

Coming in third was Aberdeen New Dawn, which again managed to outperform in nine out of 10 years. The company has been managed by Hugh Young since 1989, although it has a number of other managers.

The AIC findings suggest that how long a manager has been in charge plays a role in delivering strong, consistent performance.

Some 12 of the 20 trusts that made the league have had the same manager at the helm for at least a decade, with a number of other companies having the same manager for close to that.

Harry Nimmo has managed Standard Life UK Smaller Companies for over nine years, Bruce Stout has managed Murray International for the same period, and Peter Ewins has managed F&C Global Smaller Companies for eight years.

Annabel Brodie-Smith of AIC said: 'With markets back in "risk on" mode, it’s worth pausing and remembering that consistency of performance can be more meaningful to investors than a one-off "shoot the lights out" success.

'Of course portfolio composition, charges, and a whole host of other factors also need to be taken into account.

'It’s interesting to see that the Asia Pacific and UK Smaller Companies sectors have managed to combine consistency with spectacular gains. Perhaps it’s not surprising that some of these Asia Pacific funds also have a smaller companies focus.'

To compile its list, the AIC looked at annual returns every year for ten years across the investment company sector.

Each year the company’s performance was benchmarked against the overall average performance of the investment company industry and the companies that most consistently outperformed on an annual basis were identified.

Where two companies had the same consistency score, the volatility of the returns was used to differentiate between them.

Source: AIC


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