Top-performing investment trusts and sectors of the decade

While US tech companies grabbed headlines in the 2010s, the story was different when it came to investment trust returns. 

Funds and Investment Trusts January 8, 2020 by Tom Bailey

Over the past decade, the stock market has been dominated by large-cap growth companies, primarily listed in the United States. Companies such as Amazon, Apple and Facebook have emerged, or solidified, their place among America’s greatest companies, rewarding shareholders accordingly.

However, when it comes to investment trust returns over the past decade, the story is slightly different.

According to new data compiled by the Association of Investment Companies (AIC), the most successful investment trust sector over the past decade was biotechnology & healthcare.

On a total return basis, between January 2010 and 31 December 2019, the sector delivered an average return of 491%

Second on the list, however, was UK smaller companies, which provided an average return of 379%. Also among the top 10 was UK all companies, with an average return of 259%. Annabel Brodie-Smith, communication director at the AIC noted: “Two UK equity sectors made it into the top ten despite the Brexit referendum and subsequent lack of clarity surrounding the UK’s exit.”

Other smaller companies focused trust sectors featured in the top 10. Alongside UK smaller companies, both global smaller companies and European smaller companies made appearance, returning 330% and 222% respectively.

Brodie-Smith added: “Three smaller company sectors feature in the top ten best performers, demonstrating that investment companies are the best vehicle for holding smaller companies which can be hard to sell in times of stress.”

Trusts focusing on illiquid assets also saw strong performance, with private equity coming in fourth place, with average returns of 285% and infrastructure in ninth (226%). With the fixed asset structure, trusts are particularly well suited to giving investors access to illiquid assets.

Anyone thinking to pile into the best performing sectors, hoping for a repeat in the 2020s, however, should think carefully. As Brodie-Smith points out: “It’s always interesting to look back at the best performing companies, but it’s important to remember that past performance is not an indicator of future returns.”

The sector performance is reflective of the 10-year performance of the investment trusts currently in the sector.

Returns to 31 December 2019 10 years
AIC sector %
Overall weighted average ex. VCTs 197.72
Biotechnology & Healthcare 490.77
UK Smaller Companies 378.51
Global Smaller Companies 329.93
Private Equity 285.39
Japan 269.33
Global 263.87
UK All Companies 259.11
North America 230.95
Infrastructure 225.46
European Smaller Companies 221.84

 

In terms of individual winners the top performer over the decade was Volta Finance, which returned an eye-watering 958.7%. The trust is part of the debt - structured finance sector. Lindsell Train was the second best performing, with a return of 730.4%.

The majority of the top performing trusts, however, were part of the UK smaller companies sector, including BlackRock Smaller Companies, Henderson Smaller Companies, Rights & Issues and BlackRock Throgmorton.

  Company name AIC sector 10 years %
  Overall weighted average ex. VCTs   197.72
1 Volta Finance Debt - Structured Finance 958.70
2 Lindsell Train Global 730.38
3 Baillie Gifford Shin Nippon Japanese Smaller Companies 678.36
4 BlackRock Smaller Companies UK Smaller Companies 622.68
5 Henderson Smaller Companies UK Smaller Companies 620.90
6 Rights & Issues UK Smaller Companies 607.34
7 BlackRock Throgmorton UK Smaller Companies 600.53
8 Tetragon Financial Flexible Investment 565.72
9 Biotech Growth Biotechnology & Healthcare 541.64
10 Polar Capital Technology Technology & Media 519.53

 

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