Investment Trust Awards 2010

The last couple of years have been somewhat turbulent for equities and investment trusts in particular were badly hit during 2008.

As share prices fell and discounts widened, investors found themselves making heavy losses with investment trusts trading significantly below their net asset value (NAV).

But despite market volatility, the average investment trust has increased by 48% over the last 10 years and 2009 proved to be the best year of the decade for investment trusts with the average company up 38%.

With market sentiment high, investors can approach 2010 with less trepidation. "There's quite a lot of optimism – clearly that's market-dependent but the key message of the last decade would seem to be 'keep calm and carry on' – investment trust investors who have held their nerve have tended to be rewarded," says Annabel Brodie-Smith, spokesperson for the Association of Investment Companies (AIC).

But while investing in investment trusts might be a good decision, how do you know which one to go for?

To help you on your way, every year Moneywise Investment Trust Awards picks out the trusts that we think deserve recognition – not only for their performance but also their management, consistency and future prospects.

However, before choosing an investment trust work out your attitude to risk, how long you have to invest and what your investment goals are.


UK Growth & Income Winner: Perpetual Income and Growth Investment Trust
Trust provider: Invesco Asset Management
Fund manager: Mark Barnett
Contact: 020 7065 3897
Fund size: £566 million
NAV % performance over five years: 135.2%
Share price return over five years: 135.7%
Volatility (5yr%): 26.5%
Highly commended: Standard Life Equity Income Trust
Total expense ratio: 1.15%
Fund manager offers own ISA wrapper: Yes

The UK makes up the basis of many investors' portfolios and the growth and income sector is especially popular because it provides investors with a regular income.

However, doing so in recent years has proved difficult, with large companies suffering badly in tricky market conditions.

All of the judges acknowledged the difficult job that managers have had in this sector and the winning investment trust, Perpetual Income & Growth Investment Trust, is praised for its ability to still pull off good results.

"The fund has managed to weather the wavering fortunes of the large cap sector and returned some decent numbers. Mark Barnett is clearly managing things well in a very tricky sector," says Nick McBreen, independent financial adviser at Worldwide Financial Planning.

He believes the focus on consumer goods, utilities and industrials show Barnett believes that UK Plc will recover sooner rather than later. 

"Taking second prize is the Standard Life Equity Income Trust. Tim Cockerill, head of funds research at Ashcourt Rowan, calls it "a solid income-generating core holding". He adds: "It may not set the world alight but as a long-term component of an income-orientated portfolio it is ideal."


UK Growth Winner: Fidelity Special Values
Trust provider: Fidelity Investment International
Fund manager: Sanjeev Shah
Contact: 01732 361 144
Fund size: £318 million
NAV % performance over five years: 152.3%
Share price return over five years: 135.5%
Volatility (5yr%): 27.1%
Total expense ratio: 1.30%
Fund manager offers own ISA wrapper: Yes
Highly commended: Artemis Alpha, Hansa Trust

Deemed slightly riskier than its growth and income counterpart, because there is no need to produce yields the UK growth sector shouldn't be forgotten amid the hype for more exotic sectors.

In fact, the AIC's top performing trust for 2009 was Strategic Equity Capital in the UK Growth sector. (However, because the trust has only been around for three years it wasn't eligible for Moneywise's awards as consistency is so important to us.)

Because of the greater exposure to risk in this sector, the winning investment trust Fidelity Special Values, would be well placed in a well-diversified portfolio.

Gavin Haynes, managing director of Whitechurch Securities, praises manager Sanjeev Shah for taking on the mantle after Anthony Bolton left.

"He has once again had a good year and this trust outperformed the UK stockmarket over the past year, having also held up better than the benchmark during the difficult 2008."

Over 90% of Fidelity Special Values is invested in the UK and according to Haynes it "remains an excellent choice for active UK equity exposure".

Two trusts share the runner-up spot: Hansa Trust, which has an excellent long–term record, is praised by McBreen for its "healthy five year numbers". He adds: "This fund is a great example of conviction investing and the returns vindicate that."

Its cohort Artemis Alpha is a much smaller fund. "The fund has a high weighting in unquoted stocks – the two largest holding are unquoted. Both of these have proved to be illiquid and this has hindered performance but despite this returns have been strong," says Cockerill.


UK smaller companies winner: Standard Life UK Smaller Companies Trust
Trust provider: Standard Life Investments UK
Fund manager: Harry Nimmo
Contact: 0202 7065 3897
Fund size: £98 million
NAV % performance over five years: 168.3%
Share price return over five years: 193.2%
Volatility (5YR%): 15.1%
Total expense ratio: 1.32%
Fund manager offers own ISA wrapper: Yes
Highly commended: Gartmore Growth Opportunities

Because smaller companies tend to suffer the most in a recession, this sector has been hit hard. On the upside, smaller companies also find it easier to bounce back.

The sector is the fourth top–performing sector of 2009, up 64%, according to the AIC, which makes it the best performing UK sector.

This year's winner, Standard Life UK Smaller Companies, has won the category for the last three years and once again gets top marks from the judges.

"With over half the holdings invested in consumer services, technology and financials, Harry Nimmo continues to buck the trend of doom and gloom that is UK Plc," says McBreen.

Manager Nimmo has been at the helm since 2003 and he picks small to mid–caps that he thinks are capable of adapting their business models to fit the changing economic landscape.

Gartmore Growth Opportunities wins second prize and has nearly 200 holdings and little exposure to the FTSE250 companies. "Unlike many UK smaller companies trusts, this is trading on a small discount," says Cockerill.

Provided that its mix of industrials and technology increases investment value, this discount could decrease further and up the overall value.


European winner: Gartmore European Investment Trust
Trust provider: Gartmore Investments Limited
Fund manager: Roger Guy
Contact: 0800 289 336
Fund size: £170 million
NAV % performance over five years: 167.4%
Share price return over five years: 179.5%
Volatility (5YR%): 19.4%
Total expense ratio: 1.81%
Fund manager offers own ISA wrapper: Yes
Highly commended: SR Europe Investment Trust

Whereas the European sector perform-ed better than the UK categories in 2008, last year it didn't do so well.

A lump sum of £100 would get you £121.28 in the last year (including 3.5% expenses) in the European Sector, but you would get £136.34 in the UK growth sector and £158.50 in UK smaller companies.

European emerging markets and Eastern European investment trusts have fared better but if investing in the main sector, it's essential to find a trust that delivers consistently.

Last year's runners up, Gartmore European Investment Trust, has managed to take the top spot again. It concentrates on large and mid cap stocks and Simon Moore, senior research analyst at BestInvest, is impressed with manager Roger Guy.

"He has maintained a strong and consistent outperformance record over his 17–year track record." Cockerill extends his praise to Guy's team, calling it "one of the best European teams in the UK".

SR Europe Investment Trust is in second place, with an exclusive large company focus. "It produced excellent returns of over 50% in 2009 and has outperformed some very high quality trusts, over the long and short term," says Haynes.  


North American winner: JPMorgan American Investment Trust
Trust provider: JPMorgan Investment Trusts
Fund managers: Timothy Parton, Garrett Fish, Eytan Shapiro
Contact: 0800 403 030
Fund size: £360 million
NAV% performance over five years: 136.4%
Share price return over five years: 151.5%
Volatility (5YR%): 21.8%
Total expense ratio: 1.19%
Fund manager offers own ISA wrapper: Yes
Highly commended: Edinburgh US Tracker

This sector is a new addition to Moneywise's awards; however, it should be pointed out that the category had significantly less investment trusts to choose from and a smaller shortlist because of restrictions on eligibility.

JPMorgan's North American Investment Trust takes top spot. It is managed by JPMorgan's New York office and is exposed to large, mid cap and small US stocks.

Just as UK Smaller Companies sector has recovered more quickly than other UK sectors McBreen believes future growth in the US might also come from smaller holdings.

Haynes also praises the trust, saying: "For investors seeking mainstream US exposure, I believe that this is a very good choice and it has achieved the difficult task of outperforming the efficient S&P 500 benchmark over one, three and five years."

"If you are not going to select the JPMorgan trust then I believe the next best choice is the passive approach taken by Edinburgh US Tracker, which provides a good low-cost tracker exposure to the US market," says Haynes.

And it's this trust which takes second spot in Moneywise's awards and is praised by the other judges too. Cockerill thinks it offers a good way in to get exposure to the US markets passively.

"It has traded on a 5% discount for most of its life and as such enables those investors who favour investment trusts to gain exposure to the US market passively."


Emerging Markets Winner: Templeton Emerging Markets IT
Trust provider: Franklin Templeton Investments
Fund manager: Mark Mobius
Contact: 0800 305 306
Fund size: £1,739 million
NAV % performance over five years: 275.1%
Share price return over five years: 298.1%
Volatility (5YR%): 32.4%
Total expense ratio: 1.45%
Fund manager offers own ISA wrapper: No
Highly commended: JPMorgan Emerging Markets Investment Trust

This sector has created a buzz in the equities world and the investment trust sector is no different.

The incredible success of countries like China and the other BRIC economies has caught many private investors' attention and whereas investing in such volatile markets adds considerable risk to a portfolio, investors accept this because of the potentially lucrative awards.

It's the second most successful sector over 10 years, according to the AIC, growing by 284%.

If you can stomach volatility then at least rest assured that the winning offering from Franklin Templeton Investments ranked number one with all four judges. Cockerill is impressed that "despite being twice as large as the next closest in the sector, it remains the best performing fund".

Managed by Mark Mobius, who has a wealth of knowledge on emerging markets, Templeton Emerging Markets Investment Trust invests in Latin America, emerging Europe and Asia from companies in information, manufacturing and services.

"Anybody who has heard Mobius speak out with such conviction about this sector will find it no surprise that this fund stands out for performance," says McBreen.

Just behind Templeton is JPMorgan's Emerging Markets Investment Trust. Brazil is its largest country weighting at present but Moore thinks that the Asian part of its portfolio represents its likely growth areas.

"This is a core global emerging markets fund with a high exposure to China and India. This trust should benefit from the expected growth in these two countries," he says.


Asia Excluding Japan winner: Scottish Oriental Smaller Companies
Trust provider: First State Investments
Fund managers: Susie Rippinghall, Angus Tulloch
Contact: 0131 525 8877
Fund size: £133 million
NAV % performance over five years: 253.7%
Share price return over five years: 230%
Volatility (5YR%): 17.3%
Total expense ratio: 1.06%
Fund manager offers own ISA wrapper: No
Highly commended: Aberdeen New Dawn Investment Trust

Asia has gained a reputation as the economic leader of the world, and Asia Pacific is the top sector of the decade. Not quite at the top – but not far behind, Asia Pacific excluding Japan is the third best performing sector of the decade and has gone up by 136%.

The emergence of China as an economic powerhouse has spurred on not only this sector but emerging markets too and the success of this sector looks set to continue.

Like emerging markets, it represents a riskier part of your profile; but again like the former, the tantalising prospects leave most investors plumping for at least a slice of the Asia Pacific excluding Japan pie.

Winners Scottish Oriental Smaller Companies produced a strong recovery in 2009 despite managers First State's typical defensive approach.

Cockerill thinks the combination of investment in smaller – and therefore riskier companies, alongside First State's conservatism (no gearing) perfectly balance each other out.

"A longer term approach that analyses companies for their long term potential invariably wins through," 
he says.

Second-placed Aberdeen New Dawn Investment Trust has a strong heritage in the Asia Pacific region and a performance history to back this up.

"Despite the speculative nature of the areas in which it invests, it has consistently beaten the MSCI Asia benchmark in falling and rising markets," says Haynes.


Global Growth winner: Gartmore Global Trust
Trust provider: Gartmore Investment
Fund manager: Brian O'Neill
Contact: 0800 289 336
Fund size: £127 million
NAV % performance over five years: 167.1%
Share price return over five years: 200.9%
Volatility (5YR%): 18%
Total expense ratio: 0.85%
Fund manager offers own ISA wrapper: Yes
Highly commended: JPMorgan Overseas Investment Trust

This is the largest sector of all the investment trust sectors and gives investors the chance to diversify their profile with more exposure to different markets and assets.

Not only does this reduce the level of risk they are exposed to, it also tends to keep high global investing costs down. This year's winner is Gartmore Global Trust, with a core portfolio of about 40 stocks plus another 30 or so smaller holdings.

"Long-term stability of the fund manager has kept Gartmore Global ahead of the pack. [Its] current focus on UK and international equities, financials, oil and gas and consumer goods have produced the returns for Brian O'Neill and it should continue to prosper from global equity recovery and growth," says McBreen.

Second placed JPMorgan Overseas Investment Trust has a significant weighting in Europe (excluding the UK) and North America, accounting for 60% of its exposure. It's also invested in IT but for Moore it's the UK–based part of the portfolio that gives JPMorgan's Investment Trust the global oomph it needs.

"Holdings in large cap UK companies give global exposure [and] the current wide discount also presents a buying opportunity."


Investment Trust Group winner: JPMorgan Investment Trusts
Highly commended: Gartmore Investment Management

There were two frontrunners in this category but in the end JPMorgan pipped Gartmore to the post, thanks to its large team and resources dedicated to investment trusts.

"It has a dedicated team that just look after its individual directors of its investment trusts including its training," says Moore. Cockerill puts it quite simply: "To manage a fund you need extensive resources on the ground worldwide and this is just what JPMorgan has.

It gives it an advantage when managing all of its funds, but particularly global funds." This would explain why JPMorgan won this year's North American category and was highly commended in both the global growth and emerging markets sectors.

Gartmore Investment Management also scooped three prizes: first place in global growth and European categories and runner-up in UK smaller companies. However, JPMorgan's size as a group is significantly larger and this is what tipped the balance in its favour.


We looked at eight sectors: UK growth and income, UK growth, UK smaller companies, European, Asia excluding Japan, North America, emerging markets and global growth.

In each sector, Trustnet sent data for the top 20 performers over one, three, five and seven years to 29 January 2010, ranked on the net asset value performance (gross income reinvested).

Scores were then aggregated to find the overall top 10 in each category. From this the most volatile trusts were removed using Lipper's standard deviation ratings.

Shortlists of five funds were sent to the judges to choose winners and runners–up. The panel was asked to look at performance, manager skill, investment strategy, consistency, resources, pricing and prospects.

In the case of the North American category, because of volatility restriction only three trusts made it to the shortlist. Emerging markets also had a reduced pool of investment trusts to compare: only looking at five trusts with data only going back five years.

The judges were asked to pick the Group of the Year award based on individual performance of trusts in the awards categories as well as assessing the group's performance, organisation and expertise as a whole.

The judges were: Gavin Haynes of Whitechurch Securities; Nick McBreen of Worldwide Financial Planning; Tim Cockerill of Ashcourt Rowan Asset Management and Simon Moore of Best Invest.

Your Comments

This analysis is quite helpful, but it would have been great if there was a comparison with star performers in MorningStar in same categories.
Because the analysis needs a lot of time, so I have reduced the places where I look for ratings. One is moneywise and one is Mornign Star.