Interactive Investor

Ian Cowie: the 10 best-performing investment trusts since ISAs launched

Four of the top 10 investment trusts since April 1999 invest in the Asia-Pacific region.

24th March 2022 09:51

Ian Cowie from interactive investor

Four of the top 10 investment trusts since April 1999 invest in the Asia-Pacific region. 

Investors keen to avoid tax on their hard-earned savings have less than a fortnight left to choose their 2021-22 ISA, an annual allowance which means what it says because it really is a case of 'use it or lose it'. You can either invest up to £20,0000 before midnight 5 April or watch HM Revenue & Customs grab at least a fifth of your income and gains; maybe more.

So, exclusively for interactive investor readers, this long-term shareholder decided to identify the investment trusts that have delivered the highest total returns since the ISA tax shelter was launched in April 1999. Now here's the surprise; while most folk focus on America and many others favour China, four out of the top 10 investment trusts over this period are based more generally in the Asia-Pacific region. Three of the top 10 specialise in smaller companies.

Sad to say, I own only one of the top 10 identified by independent statisticians Morningstar. More positively for all investment trust shareholders, the average return on £1,000 over the last 23 years in any corporate member of the Association of Investment Companies (AIC) was £7,775.

To put that in perspective, only £1,844 was needed to keep pace with inflation over that period, according to the Bank of England. Now here's the real eye-stretcher you have been waiting for: the top-performing investment trust since ISAs were launched turned £1,000 into, drum roll, £36,394.

Step forward, Aberdeen Standard Asia Focus (LSE:AAS), a £504 million fund in the AIC’s 'Asia Pacific Smaller Companies' sector. In addition to that remarkable total return, AAS continues to yield 3.7% dividend income and trades at a surprising 14.6% discount to its net asset value (NAV).

Attractively for those of us who would rather avoid China, that country only scrapes into the last slot of its top 10 geographical allocations, which is led by India, Taiwan and Singapore. As you might expect, the individual companies held are unfamiliar - at least to this investor - but the top sectors are ‘technology’ and ‘industrials’, both about 20% of assets, followed by ‘consumer defensives’ with 10%.

HgCapital Trust (LSE:HGT), the £1.98 billion private equity giant, ranks second overall with a total return of just over £35,000. The management buy-out specialist remains a bit of a ‘black box’ to this observer but has delivered spectacular returns and continues to yield 1.6% dividend income and trade at a 1.7% discount to NAV.

Scottish Oriental Smaller Companies (LSE:SST) another ‘Asia Pacific Smaller Companies’ fund with total assets of £272 million, ranks third with a return of £32,940 on the same basis as above. India, Indonesia and China are the three top country holdings, with ‘Consumer Cyclical’, ‘Consumer Defensive’ and ‘Industrials’ its three top sectors. SST yields a modest 1.1% dividend yield and trades at an 11% discount to NAV.

Pacific Horizon (LSE:PHI), a £664 million trust in the ‘Asia Pacific’ sector, stands fourth with a total return of just over £32,000. Its three top countries are India, China and South Korea, with sector allocation led by ‘Basic Materials’, ‘Consumer Cyclicals’ and ‘Technology’. As you might expect from its fund manager Baillie Gifford, there are several ‘jam tomorrow’ growth stocks here - including the Singaporean digital conglomerate, Sea Ltd (NYSE:SE). Plus, perhaps more surprisingly, commodities companies such as Nickel Mines (ASX:NIC) and PT Merdeka Copper Gold. Pacific Horizon has a tiny dividend yield of 0.3% and - going against the recent switch in financial fashion away from ‘growth’ stocks back towards ‘value’ shares - continues to  trade at a modest 0.6% premium to its NAV.

You can see the other top 10 investment trusts since the launch of ISAs in the table. My only shareholding to feature here is Worldwide Healthcare (LSE:WWH), which I have held for more than a decade and which remains a top 10 holding by value in my ‘forever fund’ despite a difficult 2021. Better-known Scottish Mortgage (LSE:SMT), Britain’s biggest investment trust and the only one in the FTSE 100 index, also makes the grade.

It is important to be aware that past performance is not a guide to future returns. However, when you consider that the last 23 years began with the technology, media and telecommunications (TMT) crash, followed by the global financial crisis and, more recently, the coronavirus pandemic panic, plus worries about World War Three, these shares have achieved remarkable success in growing wealth despite challenging circumstances. 

Annabel Brodie-Smith, a director of the AIC, told me: “Investment companies have many structural advantages when it comes to delivering long-term performance. These include their stock exchange listing, which allows fund managers to take a long-term view of their portfolio, and their ability to invest in hard-to-sell assets like smaller and unquoted companies.”

Not every acorn grows into an oak, but most giant corporations start small. This AIC/Morningstar analysis underlines the importance of long-term investors retaining professionally managed exposure to new and growing businesses, which could include household names of the future. That way, shareholders might make the most of freedom from capital gains tax that ISAs provide. 

Top 10 investment trusts since ISAs launched in April 1999

Investment trust Sector Return on £1,000*
Aberdeen Standard Asia Focus (LSE:AAS) Asia Pacific Smaller Companies £36,394
HgCapital Trust (LSE:HGT) Private Equity £35,038
Scottish Oriental Smaller Companies (LSE:SST) Asia Pacific Smaller Companies £32,940
Pacific Horizon (LSE:PHI) Asia Pacific £32,086
BlackRock World Mining Trust (LSE:BRWM) Commodities & Natural Resources £23,014
TR Property (LSE:TRY) Property Securities £21,383
Worldwide Healthcare (LSE:WWH) Biotechnology & Healthcare £20,809
Aberdeen New Dawn (LSE:ABD) Asia Pacific £18,730
Scottish Mortgage (LSE:SMT) Global £18,542
Rights & Issues Investment Trust (LSE:RIII) UK Smaller Companies £18,485

* From 1 April 1999 to 17 March 2022. Source: AIC and Morningstar. 

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Worldwide Healthcare (WWH) as part of a globally diversified portfolio of investment trusts and other shares.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. 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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.