Comparing the performance of investment trust managers to their open-ended counterparts is complicated by the effect of the share price.
The performance of the assets the manager has bought is only one of the factors affecting the supply and demand for the shares of the trust.
Looking at the change in net asset value (NAV) on investment trusts makes it possible to isolate the performance of the manager from the other factors affecting supply and demand, which it is the responsibility of the board to handle.
Comparing NAV, on a total return basis, to the price of open-ended funds shows which managers excel against all of their peers across both asset classes.
Figures from FE Trustnet show that although equity income trust managers have a very strong recent record, they have been flattered by recovering from discounts during the worst years for the market and have benefited from being able to go on to a premium when the market has recovered.
Investment trust managers have the edge over their open-ended rivals, but by less than what their share price returns suggest.
Leading income funds over three years: NAV
| Name | Sector | 3yr |
|---|---|---|
| Henderson - Lowland Investment Company | IT Growth & Income | 98.5 |
| Unicorn - UK Income | UK Equity Income (100) | 87.67 |
| Finsbury Growth & Income Trust | IT Growth & Income | 85.7 |
| PFS - Chelverton UK Equity Income | UK Equity Income (100) | 76.07 |
| Cazenove - UK Equity Income | UK Equity Income (100) | 75.28 |
| Perpetual Income and Growth | IT Growth & Income | 75.2 |
| Henderson - UK Equity Income | UK Equity Income (100) | 74.38 |
| Temple Bar Investment Trust | IT Growth & Income | 73.1 |
| Threadneedle - UK Equity Alpha Income |
UK Equity Income (100) | 71.46 |
| Royal London - UK Equity Income | UK Equity Income (100) | 71.36 |
| Edinburgh Investment Trust | IT Growth & Income | 71.3 |
| Stan Life Inv - UK Equity Income Unconstrained | UK Equity Income (100) | 71.26 |
| Merchants Trust | IT Growth & Income | 71.2 |
| JOHCM - UK Equity Income in GB | UK Equity Income (100) | 69.34 |
| JP Morgan Income & Growth | IT Growth & Income | 69.1 |
| Old Mutual - UK Equity Income |
UK Equity Income (100) | 68.7 |
| Invesco Perp - UK Strategic Income | UK Equity Income (100) | 68 |
| Invesco Income Growth Trust | IT Growth & Income | 67.6 |
| Shires Income | IT Growth & Income | 66.5 |
| Threadneedle - UK Equity Income | UK Equity Income (100) | 64.42 |
| City of London | IT Growth & Income | 63.8 |
Source: FE Analytics
FE Alpha Manager James Henderson’s Lowland Investment Company comes out top of the joint table, having returned an impressive 98.5 per cent over the past three years.
Although this is a fine result, and clearly evidence of excellent management, it is a much lower figure than the 122.03 per cent made in share price terms over the same period.
Performance of trust’s price and NAV over 3yrs
Source: FE Analytics
Henderson’s trust has been helped by a sharp increase in the appetite for income-paying assets over the period and the recovery from a period of trading on a discount.
FE Alpha Manager John McClure’s open-ended Unicorn UK Income fund is second, with a total return of 87.67 per cent.
The £178.2m, five crown-rated fund has been helped in producing its excellent figures through investing towards the smaller end of the market cap spectrum, where companies have greater growth potential.
Nick Train, also an FE Alpha Manager, is third in the table with returns of 85.7 per cent on his Finsbury Growth & Income Trust.
These returns are only marginally lower than the 87.69 per cent the trust has made in share price terms – the portfolio has been in high demand over the period, pushing it on to a fairly constant premium.
Performance of trust vs sector over 3yrs
Source: FE Analytics
PFS Chelverton UK Equity Income has the second-best figures of the open-ended funds and the fourth-best overall, having returned 76.07 per cent to unit holders.
The fund is another to focus on the small and mid cap areas of the market, which has helped performance.
Managed by David Horner and David Taylor, the fund has five FE Crowns, and is only £87m in size.
Cazenove UK Equity Income, managed by Matthew Hudson, has made marginally less, at 75.28 per cent.
Henderson UK Equity Income is the next best performer, having made 74.38 per cent over the period.
The fund is managed by James Henderson, showing that he has achieved better performance on his closed-ended rather than open-ended vehicle.
This may partly be due to the greater focus on income in the open-ended portfolio, which is yielding 3.1 per cent compared with the 1.91 per cent of the Lowland Investment Trust.
However, there are some advantages to managing a closed-ended portfolio that the manager may also be benefiting from, such as not having to worry about redemptions – when unit holders sell out of a fund.
In total, 10 of the top-20 managers run investment trusts, which is impressive given that there are only 24 UK Growth & Income trusts to the 100 IMA UK Equity Income funds.
When share price performance of trusts is compared with the returns on open-ended funds, 11 out of the top-20 are trusts, with four out of the top-five closed-ended vehicles.
Leading income funds over three years: Share price
| Name | 3yr returns (%) |
|---|---|
| Henderson - Lowland Investment Company | 122.03 |
| Frostrow Capital LLP - Finsbury Growth & Income Trust |
87.69 |
| Unicorn - UK Income | 87.67 |
| Invesco Asset Management - Perpetual Income and Growth Investment Trust | 82.77 |
| Invesco Asset Management - Edinburgh Investment Tst | 81.29 |
| Investec Asset Management Ltd - Temple Bar Investment Trust | 80.33 |
| Allianz - Merchants Trust | 78.98 |
| Aberdeen Asset Managers - Dunedin Income Growth Trust |
76.37 |
| PFS - Chelverton UK Equity Income | 76.07 |
| Cazenove - UK Equity Income | 75.28 |
| Henderson - UK Equity Income | 74.38 |
| Invesco Asset Management - Invesco Income Growth Trust |
73.39 |
| Henderson - City of London IT | 73.01 |
| Threadneedle - UK Equity Alpha Income | 71.46 |
| Royal London - UK Equity Income | 71.36 |
| Stan Life Inv - UK Equity Income Unconstrained | 71.26 |
| OLIM - Value & Income Trust plc | 71.12 |
| JOHCM - UK Equity Income | 69.34 |
| Old Mutual - UK Equity Income |
68.7 |
| Invesco Perp - UK Strategic Income | 68 |
| Standard Life Investments Ltd - Standard Life Equity Income Trust | 67.68 |
Source: FE Analytics
FE Alpha Manager Neil Woodford’s Edinburgh Investment Trust is one of the portfolios flattered the most by the share price.
The trust has made 82.77 per cent on a share price basis, but just 71.3 per cent on an NAV basis.
