Interactive Investor

2015 Investment Trust Awards: Best for regular savings

12th May 2015 14:21

Fiona Hamilton from interactive investor

Best UK Equity Trust

Winner: JPMorgan Mid Cap

Returning more than any other investment trust analysed by Money Observer for its regular savings awards is JPMorgan Mid Cap, which delivered £5,287 in share price gains in the five years to 31 January based on a £50 investment per month.

On an absolute basis the trust has also performed well, returning 155.4% over the five-year period compared to an average of just 70.4% from the Association of Investment Companies (AIC) UK all companies sector.

Much of this performance has been generated over the past three years, during which time medium-sized companies in the UK have, overall, fared well. The period also coincides with the beginning of current manager Georgina Brittain's tenure.

She took over JPMorgan Mid Cap in March 2012 and despite having extensive expertise in smaller companies (she also runs three JPMorgan smaller company funds) has stuck firmly to her mid-cap remit. Currently the bulk of the trust (97.5%) is invested in companies between £1 billion and £10 billion in size, with the remainder spread between larger and smaller companies.

The trust's top 10 holdings are dominated by firms involved in housing, including Bellway, Berkeley and Howden Joinery, indicating Brittain's view on the direction of the UK's short- to medium-term growth path.

Highly commended: Henderson Smaller Companies

Money Observer Rated Fund Henderson Smaller Companies delivered the second highest return of any trust we analysed for these awards, returning £5,247.35 in the five years to 31 January based on an investment of £50 per month.

Managed by Neil Hermon since 2002, the trust is a consistent outperformer, managing to ride high in bull markets and also limit the impact of downturns.

Hermon's top 10 holdings are dominated by housebuilders and suppliers, with Bellway and Taylor Wimpey his largest two holdings at 3% and 2.8% of the portfolio respectively.

Highly commended: Finsbury Growth & Income

Perennial favourite and fellow Money Observer Rated Fund Finsbury Growth & Income wins bronze in the UK equity trust category. However, while manager Nick Train's five-year return can be bettered elsewhere in this award category, he trumps all trusts in the UK equity income sector over both five and 10 years.

Train's concentrated, brand-led style is arguably behind his success; rarely investing in more than 25 to 30 companies at any one time, the manager throws his weight behind companies he believes have both the financial stability and the consumer support to thrive over decades.

Best Global Generalist Trust

Winner: Scottish Mortgage

Winning regular savings gold in the global generalist category for the second consecutive year is Money Observer Rated Fund Scottish Mortgage, which returned £5,160.67 in the five years to 31 January based on an investment of £50 per month.

The trust is also a strong long-term performer, delivering an impressive 350% in the 10 years to 31 January compared to 133% from the AIC's global sector - making it the best in the sector by nearly 20%.

Established in 1909, Scottish Mortgage has seen a remarkable turnaround under the management of Baillie Gifford veteran James Anderson. Anderson took the reins in 2000 and began his mission to turn the once UK-focused, fairly average global generalist trust into a truly global and firmly growth-focused vehicle.

Fifteen years and a number of share buybacks from disinterested legacy investors later, and Anderson and co-manager Tom Slater (who came on board in 2009) have succeeded in making Scottish Mortgage one of the most unusual trusts in the sector.

Controversially, Scottish Mortgage has a huge slant toward technology stocks - so much so that Baillie Gifford no longer publishes its sector weightings. Its top 10 holdings include US internet giants Amazon, Facebook and Google alongside Chinese contenders Tencent and Alibaba - Anderson and Slater made a very early investment in the latter, enjoying a large windfall upon its IPO last year.

However, Slater shrugs off the "tech" label, insisting that these firms are "clearly differentiated". Moreover, he argues that they are reshaping or "disrupting" their respective fields, which is key for his selection.

Highly commended: Foreign & Colonial Investment Trust

The oldest investment trust in the UK, Money Observer Rated Fund Foreign & Colonial Investment Trust has seen its fair share of ups and downs since its inception in 1868. The last five years have been no exception, with the veteran trust bouncing between the third and first quartile since 2010.

However, last year marked the strongest period for more than six years as it delivered over 25% in the 12 months to 31 January, suggesting the appointment of new manager Paul Niven last June may already be paying dividends.

Highly commended: Martin Currie Global Portfolio

Taking bronze in the category is Martin Currie Global Portfolio, which returned £4,233.08 in the five years to 31 January based on an investment of £50 per month. Established in 1999, the trust has been managed by Martin Currie's Tom Walker since 2000.

Walker has a fairly defensive style, and the trust performs well in down markets - in 2011 it returned 8.5% compared to an average loss of 0.4% from the global sector. The bulk of the portfolio is currently in North America and Europe, with some healthy exposure to Asia and emerging markets, particularly Indonesia.

Best Overseas Deleloped Markets Trust

Winner: Baillie Gifford Japan

Money Observer Rated Fund Baillie Gifford Japan takes gold in the overseas developed markets category thanks to a strong return for regular savers of £5,148.10 over five years to 31 January. This is despite a poor run of performance over the past year, during which time the trust returned just 7.3% compared to 14.8% from the average Japan equities trust, placing it at the bottom of the sector over the period.

However, like all Baillie Gifford managers, the trust's manager Sarah Whitley pays little heed to short-term movements. Instead, she focuses on the long term, demonstrated by her sector-topping returns of 150% over five years and 134% over 10 years to 31 January.

As Whitley argues, this long-term mindset is essential considering the trust's remit, which is to invest in medium-sized and small Japanese businesses that have the potential for above-average growth over a period of five years or more.

Highly commended: Jupiter European Opportunities

Money Observer Rated Fund Jupiter European Opportunities takes silver, although almost every stock that manager Alexander Darwall touches turns to gold.

Despite considerable turmoil within European markets over the past 10 years, Darwall has delivered share price returns of 334% compared to a sector average of 194%, with the manager usually delivering double that of the sector in any one year. This does, however, mean that the trust is often trading at a premium to net asset value.

Highly commended: Henderson European Focus

Snapping at the heels of Jupiter European Opportunities is fellow Money Observer Rated Fund Henderson European Focus, which wins bronze for its return of £4,971.15 in the five years to 31 January based on £50 invested per month.

Managed by John Bennett since 2010, the trust has had a strong three years, topping the sector in 2013 when Darwall wobbled. Bennett tends to stick to larger European companies and his top 10 holdings usually consist of well-known names in the financial and healthcare sectors.

Best Overseas Smaller Companies Trust

Winner: European Assets

Taking regular savings gold for best overseas smaller companies trust for the second year running is F&C-managed European Assets, which returned £5,128.89 in the five years to 31 January based on an investment of £50 per month.

Managed by Sam Cosh since 2011, European Assets is unusual for a smaller companies fund in that it tends to outperform in down markets and underperform during bull runs.

For example, last year - Europe's most recent annus horribilis - this Money Observer Rated Fund returned nearly 9%, compared to an average 5.5% loss from the European smaller companies sector.

According to Cosh this is due to the trust's focus on "quality" companies, which he defines as those with strong balance sheets, good cash flow and market staying power. As an example Cosh cites German property lender Aareal Bank, a "conservatively run, well-capitalised bank" that he says is taking advantage of weak competitors in a recovering market.

Dairy culture manufacturer Chr. Hansen is another favourite, again due to a healthy balance sheet and predictable earnings stream alongside its exposure to a growing consumer base in China.

Financial companies account for over 30% of Cosh's portfolio - his largest single sector weighting. He says this slant is simply because of the abundance of opportunities, with those firms that survived the financial crisis having emerged stronger and more profitable.

Highly commended: F&C Global Smaller Companies

F&C Global Smaller Companies has stormed ahead since 2009, posting consistent first and second-quartile share price returns throughout the period. In the five years to 31 January the trust has returned 140% compared to just 68% from the global sector, or in regular savings terms, £4,594.12 based on £50 invested per month.

The Money Observer Rated Fund has been managed by F&C's director of smaller companies Peter Ewins since 2005; he invests in both direct equities and other funds, and is currently keen on Asia and Japan, with his top six holdings all invested in these regions.

Highly commended: Atlantis Japan Growth

Established in 1996, Atlantis Japan Growth is one of the lesser known Japanese smaller company investment trusts. However, as its bronze regular savings award attests, the trust has put in some solid returns. In the five years to 31 January the trust has delivered £4,392.65 based on an investment of £50 per month, or 89.4% in absolute terms.

Managed by founder of Atlantis Investment Research Edwin Merner since launch, the portfolio of this Money Observer Rated Fund is dominated by financial and consumer-related stocks; areas that Merner believes will benefit from prime minister Abe's structural reform plans.

Best Developing Markets Trust

Winner: Pacific Assets

Graduating from runner-up position in last year's medals for monthly money, Money Observer Rated Fund Pacific Assets scoops gold in the developing markets category for its return of £4,588.45 in the five years to 31 January based on an investment of £50 per month.

The trust's portfolio is run by Asia and emerging markets aficionado First State Stewart, and focuses largely on Asian countries within the Pacific Basin region excluding Japan, Australia and New Zealand.

India is currently the trust's largest regional weighting with over 30% of the portfolio invested in the country, followed by Taiwan and the Philippines. Perhaps surprisingly, only 5% of the portfolio is invested in China and 6% in Hong Kong.

First State takes a sustainable investment approach within Pacific Assets, investing in the shares of companies that are set to benefit from, and contribute to, the sustainable development of the countries in which they operate.

The trust's largest holdings include Indian multinational IT services provider Tech Mahindra, which occupies the top spot in the portfolio at close to 6%. Indeed, information technology is Pacific Assets' largest sector exposure at 20.4% of the trust, with a number of more familiar names also gracing its top 10 holdings, including Taiwan Semiconductor Manufacturing.

Highly Commended: Scottish Oriental Smaller Companies

Last year's winner in the developing markets category, Money Observer Rated Fund Scottish Oriental Smaller Companies, takes silver this year thanks to its £4,252.60 return over five years to 31 January, based on an investment of £50 per month.

This slide is due to some disappointing recent share price returns that saw the trust drop to the bottom quartile of the sector last year. This has however, prompted its discount to widen to over 8%, providing a good entry point for this First State-managed trust which has a strong three-, five- and 10-year record.

Highly commended: Aberdeen Asian Smaller Companies

Another victim of the downturn in sentiment towards Asian smaller companies over the past two years, Aberdeen Asian Smaller Companies has also posted some disappointing share price returns since 2013. This has not, however, prevented the Money Observer Rated Fund from bagging bronze for its £4,106.04 return over five years based on £50 invested per month.

As with Scottish Oriental Smaller Companies, the trust is a solid long-term performer. Although it can invest in Australia and the UK, it focuses on companies within the Pacific Basin region excluding Japan, particularly Malaysia, Thailand and India.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.