Six of the top 50 trusts for net asset value (NAV) performance come from the IT Global and Global Equity Income sectors, according to data from the Association of Investment Companies.
It is generally accepted that it is harder for global funds to outperform due to a number of factors including less regional mid- and small-cap expertise and the high weighting to the outperforming US market of the benchmark.
Indeed, over the last decade the average trust in the IT Global and IT Global Equity Income sectors have underperformed the MSCI All Country World index, as the below chart shows.
Performance of sectors vs MSCI All Countries World over 10yrs to 31 July 2017
Source: FE Analytics
However, the top trusts in both sectors have outperformed by some margin and are among the best for the entire investment trust universe.
The global equity sectors house as many trusts in the top 50 as the much lauded IT UK Smaller Companies sector, which FE Trustnet profiled earlier this week.
In the continuation of its latest series, FE Trustnet strips out share price movement to find the best performing investment trusts based on their NAV alone.
NAV is the amount of money investors would receive per share if all of the underlying assets owned by the fund were sold and paid out to the shareholders.
This therefore shows the performance of the underlying portfolios with dividends reinvested.
The top performing trust of the two global sectors is the five crown-rated Lindsell Train investment trust, run by FE Alpha Manager Nick Train.
The £166m Lindsell Train trust has returned 469.7 per cent over the decade to the end of July, according FE Analytics.
With share price gains stripped out, the fund has returned 373.84 per cent from its underlying portfolio over the period, according to data from the AIC.
Train typically has a bias towards quality growth companies and those that he believes have a competitive advantage through strong brands and customer loyalty.
The portfolio is 37.9 per cent invested in the unlisted Lindsell Train Limited – the investment management company – as well as 27.1 per cent in consumer staples and 17.9 per cent in media companies.
The investment trust has a yield of 1.9 per cent and ongoing charges of 0.98 per cent, though this rises 3.68 per cent when the latest performance charges are included, according to the AIC. It is trading on a premium of 22.3 per cent.
This is the second sector the manager is top in, having also topped our list of UK trusts with his Finsbury Growth & Income.
Table of top performing global trusts by NAV returns
Source: FE Analytics
The second best performing global trust is fellow five crown-rated fund Scottish Mortgage Investment Trust run by James Anderson and deputy manager Tom Slater.
Analysts at Kepler Intelligence Trust said: “The largest and most liquid UK-listed trust has generated significant levels of outperformance compared to its peers and the wider index.”
Indeed, as the below shows, the £6bn trust has made a total return of 300.96 per cent versus the sector’s 114.52 per cent return and beating the FTSE All World benchmark by 153.98 percentage points.
Once share price gains stripped out, the fund has returned 250.89 per cent from its underlying portfolio over the period, according to data from the AIC.
Performance of trust vs sector and benchmark over 10yrs to 31 July 2017
Source: FE Analytics
Earlier this year the trust was added to the FTSE 100, which Kepler Analysts noted “should lead to even greater demand for shares as it comes onto the radar of a greater number of index trackers and passively managed strategies”.
They added: “This is very much a bottom up stockpicking approach, with James and Tom deliberately ignoring short-term macroeconomic noise.
“Overall there around 70 holdings at any one time, with winners 'run' sometimes for a very long time, and otherwise sized purely according to the managers' conviction on longer term returns going forward.”
The largest 30 holdings accounted for 84.4 per cent of the assets, and the total number of holdings was 74. The portfolio includes 36 unlisted investments, which in aggregate account for 12.2 per cent of holdings.
The trust currently trades on a 2.1 premium and has charges of 0.44 per cent, according to the AIC.
F&C Global Smaller Companies is the third best performer on the list, having returned 189.55 per cent on a NAV basis. It made a total return of 219.9 per cent over the period.
The £763m trust is run by Peter Ewins, who has been in charge since 2005, and uses a blend of direct securities and funds within the portfolio.
Eight of the top 10 holdings in the portfolio are funds, with Eastspring Investments Japan Smaller Companies, Aberdeen Global Japanese Smaller Companies and Scottish Oriental Smaller Companies Investment Trust its top three positions.
The trust is 39.1 per cent weighted to the US, 27.9 per cent to the UK and 13 per cent to continental Europe.
It is trading at net asset value and has charges of 0.61 per cent according to the latest data from the AIC.
Fourth among the findings is JP Morgan Global Growth & Income – the first trust from the Global Equity Income sector – run by Jeroen Huysinga.
Over the last decade the trust has made a total return of 197.73 per cent with NAV returns of 187.56 per cent over the period.
Last year the trust’s board adopted a new ‘enhanced dividend’ policy, allowing it to pay dividends from capital raised through investment realisation. The move allowed it to adopt an annual 4 per cent dividend target through quarterly pay-outs.
At the time, the board said the move would “widen the appeal” to investors looking for income and by February this year the discount had reduced from 14.8 per cent to 5.6 per cent. It is currently on a premium of 1.5 per cent.
Additionally, after a strong start to the year, the trust has reduced its gearing from 6.5-7 per cent for previous five years to 0 per cent.
The manager is focused on building a high conviction portfolio of between 50 and 90 stocks, driven by bottom-up stock selection rather than geographical or sector allocation.
According to the AIC the trust has a yield of 3.9 per cent and charges of 0.63 per cent.
The other entrant to the top 50 investment trusts by NAV return over the last decade is the £1.6bn Murray International Trust run by Bruce Stout.
The trust has returned 192.46 per cent over the 10 years to 31 July 2017, beating the IT Global Equity Income sector and FTSE World ex UK benchmark by 65.69 and 35.27 percentage points respectively.
Performance of trust vs sector and benchmark over 10yrs to 31 July 2017
Source: FE Analytics
Once share price gains stripped out, the fund has returned 172.03 per cent from its underlying portfolio over the period.
Earlier this month, the manager explained why he has begun to focus more on the emerging markets than the developed markets as the low yield environment and uncertain interest rate policies in the developed world are making comparisons difficult.
“It is a lot easier to identify normal relationships in the emerging world than it is in the developed world because they don’t have all the debt,” Stout said.
“They have regular type yield curves that go from short rates being at a low level and longer rates being higher so there is a curve there.
“You can put money in a bank in the emerging markets and get a positive return on your savings you don’t pay the bank to look after it for you the way we do.”
As such, the trust is 24.4 per cent invested in Asia ex Japan equities and 16.7 per cent in Latin America and other emerging market equities.
The trust has a yield of 3.8 per cent and charges of 0.68 per cent. Murray International shares are on a premium of 2.4 per cent.
The final trust amid the top 50 investment trusts by NAV return is the £151m Mid Wynd International run by Alex Illingworth, Rosanna Burcheri and Simon Edelsten. The managers took over the trust in 2014 from long-tenured Michael MacPhee, who retired.
At the time, the trust, which had been the smallest of five global investment trusts run by Baillie Gifford, was taken over by Artemis Investment Management.
Over the last decade to the end of July, the trust has returned 217.03 per cent on a total return basis with NAV returns of 166.73 per cent.
The four crown-rated fund is heavily invested in North America (48.4 per cent), and analysts at Kepler Trust Intelligence noted this was due to the managers’ process.
“The trust uses a flexible investment process, run by managers that incorporate both bottom-up analyse via their value models as well as top down views through various themes has led the trust to have a greater weighting to more economically-sensitive US stocks over recent months at the expense of more defensive areas such as consumer staples,” they noted.
“This process has not only delivered attractive risk-adjusted returns, but a sense of pragmatism among the managers suggests the trust is better placed to cope with the recent shift in market dynamics than many of its defensive, more concentrated rivals.”
The trust has a yield of 1.1 per cent and charges of 0.75 per cent, according to the AIC.