Page 28 - DIY Investor Magazine - Issue 28

GROWTH HAS AN IN-BUILT ADVANTAGE The calculation method favours trusts that had stronger returns in the 2010s than the 2000s as their gains would have mostly been made once more money had been invested; thus Edinburgh Worldwide reached £1.6m from a 958% total return, but Scottish Oriental Smaller £1.0m despite a 2,839% total return. So there’s a strong overlap between the best performers of the last 10 years and this list; also the ISA allowance was just £7k for the 2000s, rising to £10k in 2010, £15k in 2014, and £20k in 2017, thus rewarding the late bloomers. This means ‘growth’ trusts dominate the list, although the start point works against them being just a year before the dot-com crash when ‘value’ trusts were ascendant. To put the total return figures in perspective, they vary from 10% a year (Standard Life UK Smaller’s 693%) to 17.5% a year (Pacific Horizon’s 3,348%). Since April 1999, UK markets have returned about 175% (4.6% pa) and world markets around 350% (7% pa); UK inflation has been around 80% (2.7% pa). WHAT’S WORKED BEST? Lists like this are useful when it comes to identifying broad themes that have worked well for a long period of time and we can then ask whether these themes can continue to outperform - smaller companies have been the most dominant theme, with 13 out of the 28 trusts investing in tiddlers. There are small-cap representatives from each of the six sub- sectors: Global, the UK, North America, Europe, Japan, and Asia Pacific, suggesting this trend isn’t a regional one-off; I’ve long been a fan of this sector and of the small-cap effect, so there’s good reason to think this is a trend with legs. Also small caps are more illiquid, less scrutinised by analysts, and can work well within the structure of investment trusts. Technology and biotech/healthcare are the two stand-out sectors, although sector specialisation is a minority sport for investment trusts with commodities the only other sector of notable size; financials, infrastructure securities, and environmental — are newer and more sparsely populated. When it comes to regional focus, Asia Pacific/Japan is the clear winner but then there are nearly twice as many trusts that focus on this region as those that specialise in the Americas and Europe combined. MANAGEMENT FIRMS OF NOTE Baillie Gifford has five names on the list with three of those very near the top; JPMorgan also has five, Aberdeen Standard three and BlackRock and Orbimed two apiece. Launched in 2001, Lindsell Train Investment Trust just misses out but it’s up around 1,900% since then; Finsbury Growth & Income’s UK large-cap focus meant it didn’t quite make the £1m mark, but it is up 700% since Nick Train took over in 2000. Around half of the trusts have changed management firms over the last two decades; some changes include Baillie Gifford running Edinburgh Worldwide since 2003, Polar Capital taking over Henderson’s technology trust when its management team defected, and JPMorgan assuming its trusts after the takeover of Fleming in 2001. LONG-SERVING MANAGERS According to the Investment Trust Handbook, ten trusts had the same managers for the whole 22-year period since ISAs were introduced; Simon Knott at Rights & Issues can claim bragging rights having been in post since 1984, with other long-servers including Katie Potts at Herald (1994), Austin Forey at JP Morgan Emerging Markets (1994) and Georgina Brittain JP Morgan Smaller (1998). DIY Investor Magazine | Apr 2021 28