We unveil the winners and highly commended investment trusts across 15 sectors – and find a number of returning champions among them.
The winners of Money Observer’s annual Investment Trust Awards are testament to the success of active management and the advantages enjoyed by investment trusts.
Most of our winners have thrashed benchmark returns over the three years under consideration to 31 January 2020 and some for considerably longer periods. Several have boosted returns by deploying gearing and most either focus on smaller companies (as the winners of the Japan, US, Europe, and UK Growth awards all do).
Exciting smaller companies
Others include some exciting smaller companies in a more diversified portfolio, as in the case of the Best Large Trust award winner, Allianz Technology Trust. Straying down the size spectrum in this way is much easier for closed-ended investment companies than for open-ended funds.
When judging the awards, we exclude trusts that have fallen into the bottom quartile of their sector eight or more times in 25 rolling one-year periods (measured monthly), as we think investors are likely to be uncomfortable with such volatility.
We then give priority to trusts that have achieved above-average net asset value (NAV) returns in each of the past three years, as this provides a better guide to future success than if strong three-year figures are attributable to one stellar year.
Our approach has again been validated by the repeat success of a number of previous award winners. Most notable is Scottish Mortgage Trust, which has won our Best Global Growth Trust award for the sixth successive year; and JPMorgan Emerging Markets Trust, which has won the Best Global Emerging Markets Trust award for the third year running.
Allianz Technology, Scottish American, Finsbury Growth & Income, Montanaro European Smaller Companies, JPMorgan Asian Growth & Income and HgCapital have all retained the awards they won last year.
Better than average
Many of our award winners have suffered steep setbacks since the end of the period under review to 31 January 2020, but they all held up better than average in the 2018 downturn and in many cases have once again proved more resilient than their peers.
Investors who were reluctant to buy into them when they were on premium ratings may now be able to do so at a discount. For those uncertain about timing, drip-feeding purchases means benefiting from pound cost-averaging. The bounce, when it eventually comes, could be steep.
The 2020 roll of honour
Our latest articles on investment trusts
How the Awards are won
Only investment companies that are recognised by the Association of Investment Companies (AIC) qualify for inclusion.
Our awards are based on an investment company’s net asset value (NAV) total return (i.e. with income reinvested).
Trusts whose NAV returns have fallen into the bottom quartile of their sector eight or more times in 25 rolling one-year periods (measured monthly) are excluded on grounds of excessive volatility.
We rank qualifying trusts in the sector(s) under consideration according to the following weighted result: 40% for annual NAV performance to 31 January 2020, 30% to January 2019, 20% to January 2018 and 10% for the overall three-year NAV return to 31 January 2020. However, in the private equity category, each year’s performance is given equal weight because returns tend to flow through sporadically.
To emphasise consistency, we favour contenders that have been in the top half of the peer group in each of the past three years. Qualitative aspects are also taken into consideration before the final awards are announced.
Note: The data for the awards was sourced from the Association of Investment Companies and Morningstar. All of the ‘Key Facts’ data and charted performance (over a three-year period) pertains to 31 January.
Premier Group Award
The Premier Group award is open to management groups with a diversified choice of investment companies. We include the returns of all those managed by the group for at least three years, or those that retained the investment manager in the event of a switch. The contribution of each company is calculated on the same weighted three-year basis as the sector-based awards.
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