Funds vs trusts with same manager: the biggest performance gaps

Advocates of investment trusts have long argued that they produce better returns than the competition, and recent analysis does vindicate that claim to an extent.

Recent data - admittedly published by investment trust trade body (and cheerleader) the Association of Investment Companies (AIC) - shows that 77% of trusts beat their “sister” funds, or those open-ended funds with the same teams and a similar approach, over a 10-year period.

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Trusts also largely tended to do better than their siblings over one, three and five-year periods, if with differing degrees of success, as the table shows.

Source: AIC/Morningstar.

These figures do help to make the case for a closed-ended fund, especially when the same team runs both vehicles. And there are plenty of ways the trust can boost performance, be it using gearing or having more concentrated position sizes.

But if the AIC shared the success rates of trusts, it didn’t go into the specific examples of which trusts beat, or lagged, the open-ended equivalent by the most. 

Here, we unpick which investment trusts from that sample are the most ahead, and the most behind, the open-ended equivalent.

A five-year view

A stunning 82% of trusts in the AIC’s sample beat their siblings over the 12 months to the end of March, but this is quite a generous time frame to use.

Markets have performed phenomenally well over that year and trusts should theoretically do a better job of capturing the gains when everything is going up.

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It’s worth instead taking the most critical view and using a five-year period to the same date.

This captures some good times for markets but also includes a period of rate rises, the resulting 2022 sell-off, and more generally a time when trusts have been somewhat out of favour. That’s a tougher test, so those trusts that have managed to both survive and outperform can take plenty of credit.

Only 25 of 47 trusts used in the five-year sample beat the open-ended fund, but as our table shows a handful have managed to outperform handsomely. More than 10 trusts have managed a double-digit percentage point outperformance against the open-ended option.

Source: AIC/Morningstar. Past performance is not a guide to future performance.

We recently pointed to the fact that UK small-cap funds with concentrated positions had enjoyed some of the best performance out of their sector in the last year, and here we duly see Strategic Equity Capital Ord crop up with impressive performance from over a five-year period.

Interestingly, it has had a totally different experience to its open-ended “sibling”, WS Gresham House UK Smaller Coms C Acc.

Both are run by Ken Wotton and have some similar holdings such as Brooks Macdonald Group.

But as the table shows, the trust has much more concentrated position sizes, as well as a bigger allocation to micro-cap shares, which may reflect its greater ability to hold illiquid assets.

Source: Fund factsheets, 31/03/26.

That approach has enabled it, seemingly, to benefit from some big price gains. Trufin  Ordinary Shares has returned almost 90% over the past 12 months, with Costain Group returning 65%.

We see some very different trust winners elsewhere in the list.

Polar Capital Glb Healthcare Ord is well ahead of Polar Capital Healthcare Opps I Acc over five years, a contrast with the fact that the open-ended fund is actually well ahead over the last 12 months.

Then there’s JPMorgan American Ordtrouncing open-ended peer JPM America Equity and Schroder Japan Trust Ord hugely outperforming the Schroder Tokyo Z Acc £ fund.

However, in some cases, the edge for the trust isn’t that obvious. As the table shows, the trusts are not always more concentrated, although those with lesser concentration have put some gearing to work.

Source: Factsheets/AIC.

And the portfolios aren’t always notably different.

If we compare the JPMorgan America funds, they recently had the exact same top 10 holdings on similar weightings, with the open-ended fund actually being slightly more concentrated.

The laggards

Trusts can have a worse time than open-ended funds, and that’s demonstrated by the fact that some trusts have underperformed their “siblings” over this period of analysis.

To give a few examples, Baillie Gifford Japan Ord is notably behind Baillie Gifford Japanese Inc Gr B £ Acc, while TR Property Ord, a trust that invests in property shares across Europe, compares poorly with the open-ended fund run by the same manager, CT Property Growth & Income H Acc.

However, these two do have notable differences: when it comes to the property pairing around half the open-ended fund is in the UK market with top holdings including Tritax Big Box Ord, LondonMetric Property and Supermarket Income REIT. TR Property, by contrast, appears to lean more into exposure to shares in Europe.

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Meanwhile, Schroder UK Mid Cap Ord has performed strongly in the last five years but trails its open-ended equivalent, Schroder UK Mid 250 Z Acc. 

There are some notable differences between the two as of late: top 10 holdings in the trust such as Cranswick fail to appear in the top 10 list for the fund, although they do share many names.

Schroder UK Mid Cap is also one trust where US activist Saba still has a substantial presence.

It’s also interesting to see that Henderson Far East Income Ord, a hugely popular trust among ii customers, trails its open-ended sibling Janus Henderson Asian Div Inc UT I Inc by total returns.

However, the fund definitely lags on yield: its trailing 12-month dividend yield comes to around 6.8%, well shy of HFEL’s 10% or so. Investors already seemingly sacrifice total returns versus peers for the sake of income by backing HFEL, so it’s not clear that the open-ended fund’s better returns would appeal to them.

Finally, as with TR Property and its sibling, investors should remember that “siblings” are not always as similar as we might assume.

That’s most obviously an issue when it comes to some of the Baillie Gifford-managed trusts. 

To give one example, Saba victim Edinburgh Worldwide Ord does have an open-ended sibling in Baillie Gifford Global Discovery B Acc, but the latter is unable to hold private companies.