Trusts can receive a strong boost to their performance figures when their discount narrows, which means that returns to investors are highly dependent on supply and demand of the shares as well as the performance of the manager.
However, the NAV total return figure shows purely how the manager’s stock selection has performed, providing a fairer comparison to the returns of open-ended funds.
According to FE Trustnet data, four funds have returned more than the best-performing investment trusts over three years, and only four of the top-20 portfolios are ITs.
Many of the top-performing portfolios have a strong mid cap focus, but our figures show that open-ended mid cap funds have done better than their closed-ended rivals on an NAV basis.
Performance of funds vs trusts over 3yrs
| Fund |
3yr returns (%) |
Trust or fund? |
|---|---|---|
| Neptune UK Mid Cap |
96.3 |
Fund |
| Standard Life UK Equity Unconstrained | 93.1 | Fund |
| Old Mutual UK Dynamic Equity | 93.1 | Fund |
| Cazenove UK Opportunities | 91.5 | Fund |
| Schroder UK Mid Cap | 90.9 | Trust |
| Barclays UK Lower Cap | 90.7 | Fund |
| Liontrust Special Situations | 87.4 | Fund |
| CF Lindsell Train UK Equity | 83.4 | Fund |
| Old Mutual UK Mid Cap | 82.9 | Fund |
| Ecclesiastical UK Equity Growth | 82.8 | Fund |
| Invesco Perpetual Select UK Equity | 79.9 | Trust |
| Franklin UK Mid Cap | 79.77 | Fund |
| Royal London Uk Mid-Cap Growth | 79.7 | Fund |
| JP Morgan Mid Cap | 79.4 | Trust |
| Cavendish Opportunities | 76.24 | Fund |
| F&C UK Mid Cap | 75.67 | Fund |
| Unicorn Free Spirit | 74.99 | Fund |
| Unicorn Outstanding British Companies | 73.73 | Fund |
| Henderson Opportunities | 70.7 | Trust |
| Aberdeen UK Mid Cap | 69.09 | Fund |
Source: FE Analytics
We looked at funds in the IMA UK All Companies sector and compared them to the IT UK Growth trusts.
The best results were obtained by the Neptune UK Mid Cap fund, run by FE Alpha Manager Mark Martin.
Martin’s £96m fund, which has five FE Crowns, has made 96.3 per cent over the past three years, while the FTSE 250 index of mid cap companies has made 63.22 per cent.
Performance of fund vs index over 3yrs
Source: FE Analytics
Martin has been served well by his value approach, which was examined in detail in a recent FE Trustnet article.
The fund has edged ahead of Standard Life UK Equity Unconstrained, which has returned 93.1 per cent over this time.
As the name of the fund suggests, it is unconstrained by a benchmark, but has invested heavily in the mid cap area of the market.
Ed Leggett’s fund is a high-beta product, with its score of 1.36 to the FTSE 250 the second-highest of a fund to its benchmark in the sector.
It is extremely volatile, with the second-highest annualised volatility over this time period, but this has paid off in terms of performance.
Both Old Mutual UK Dynamic Equity and Cazenove UK Opportunities also have high weightings to the mid cap sectors, which has helped them return 93.1 and 91.5 per cent respectively.
Both funds narrowly beat the top-performing investment trust, Schroder UK Mid Cap, which has returned 90.9 per cent.
The £126m trust, which is managed by Andy Brough and Rosemary Banyard, has returned much more than their better-known Schroder UK Mid 250 open-ended fund, which is up 68.43 per cent over this time.
On a total return basis, the outperformance is even starker. The trust has made 120.89 per cent over this time, according to data from FE Analytics.
Performance of fund vs trust and index over 3yrs
Source: FE Analytics
These figures mean that investors would have made more money in that portfolio than any other UK growth fund or trust.
The next best investment trust is Invesco Perpetual Select UK Equity portfolio, managed by Mark Barnett.
It is another unconstrained portfolio to have been weighted to the fast-growing mid cap area of the market, with 31 per cent in the FTSE 250 and 53 per cent in the FTSE 100.
Barnett’s NAV returns of 79.9 per cent are flattered slightly by the 84.44 per cent the trust has made, inclusive of discount fluctuations.
There are many more open-ended funds than closed-ended funds in the space, with 285 funds with a three-year history compared with just 16 trusts.
However, it is notable that the closed-ended funds have on average been less successful than the open-ended funds in the mid cap space, which has led the market.
This is despite the advantages that managers of trusts have: they are able to be fully invested without worrying about keeping cash on hand to meet sudden redemptions.
It is true that these advantages should be more apparent in less liquid assets, however, and in a further article we will be looking at the results for the smaller companies funds to see if this is the case.
Looking at share price rather than NAV, there are three trusts that would be included in a list of the top-10 performers.
Share price and NAV performance over 3yrs
| Name | Share price | NAV total return (%) |
|---|---|---|
| Schroder UK Mid Cap | 120.89 | 90.9 |
| JP Morgan Mid Cap | 90.17 | 79.4 |
| Invesco Perpetual Select UK Equity | 84.44 | 79.9 |
| Henderson Opportunities | 82.6 | 70.7 |
Source: FE Analytics
JP Morgan Mid Cap has made 90.17 per cent in share price terms, but just 79.4 per cent in NAV total return.
Invesco Perpetual Select UK Equity has made 84.44 per cent, and the Henderson Opportunities Trust 82.6 per cent.
In the first article in the series, FE Trustnet looked at the best-performing open- and closed-ended UK equity income funds on an NAV basis alone.
