Interactive Investor

Ian Cowie: top 10 investment trust winners across multiple governments

Our columnist reports on data that reveals the best-performing investment trusts since 1987, the year in which the Conservative Party won its third successive general election.

27th June 2024 10:21

by Ian Cowie from interactive investor

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It doesn’t matter who you vote for next week because the government always gets in. Never mind my 1970s nihilism, now new research shows how shareholders profited from ignoring political news and remaining invested, regardless of who wins the keys to 10 Downing Street.

More usefully for investors today, independent analysts at Morningstar have identified the top 10 investment trusts which delivered the greatest total returns since 1987. That start date is purely accidental, due to the happenstance availability of data, but spans several political parties’ periods in power - and also nearly covers my working lifetime, since I began work on Fleet Street.

Sad to say, today I am a shareholder in only one of the top 10 investment trusts from this snapshot of multi-decade returns. On a happier note, the average investment trust turned £1,000 into more than £25,000 over this 37-year period.

Better still, the top performer is a tiny, little-known UK smaller companies investment trust that turned the same original sum into an eye-stretching £196,364 over those decades. Step forward, Rights & Issues Investment Trust (LSE:RIII), which sustained average annual returns above 15% over the entire period analysed by Morningstar. Launched in 1962, RII has £143 million in assets managed by Jupiter and continues to trade -8% below its net asset value (NAV).

As you might expect with a portfolio of corporate tiddlers, none of RII’s top holdings is a household name. But its biggest stake, Renold (LSE:RNO), claims to be “the world's leading manufacturer of chains, gears and couplings”; while Hill & Smith (LSE:HILS) makes galvanised steel street furniture, such as signs and lights; and Treatt (LSE:TET) produces flavours and fragrances.

ICG Enterprise Trust (LSE:ICGT) ranks second with a total return of £83,353 and average annualised returns just under 13%. Although much larger than RII with assets of £1.3 billion, ICGT is probably even less-well known as it is a private equity investment trust, specialising in companies that do not have a stock market listing. This may explain its -34% discount to NAV.

Scottish Mortgage (LSE:SMT) stands third with £63,946 and average annual returns of just under 12%. Much bigger and better-known with assets of £14.2 billion, despite its recent difficulties, SMT’s top holdings include the artificial intelligence (AI) graphics processing units (GPU) maker Nvidia (NASDAQ:NVDA), which shot the lights out last year but saw $500 million briefly wiped off its stock market valuation last week before it bounced back this week. The car makers, Tesla (NASDAQ:TSLA) and Ferrari (NYSE:RACE), also feature in a portfolio that trades at a -9% discount to NAV.

Canadian General Investments (LSE:CGI) came fourth with £53,876 and annualised returns of just over 11%. This is another big blue chip, with assets of Canadian $1.4 billion (£835 million), after being launched in 1930 despite the economic despair of the Great Depression. Top holdings are led by NVDA but also include the iPhone maker Apple  (NASDAQ:AAPL), the railway Canadian Pacific Kansas City (NYSE:CP), and the self-descriptive West Fraser Timber (TSE:WFG).

Despite its long track record of capital growth, CGI continues to trade at a mammoth -42% discount to its NAV. Difficulties reclaiming Canadian withholding taxes - the country lacks any equivalent to the USA’s W-8BEN form to help foreign investors - may partly explain its relatively low profile and valuation. I intend to hang on in the hope that relatively recent moves to reach a wider audience - including CGI joining the Association of Investment Companies (AIC) - may reward patient shareholders.

Nick Britton, a director of the AIC, told me: “Governments come and go but the stock market marches on – with its astonishing ability to compound returns over time. Many trusts have moderate levels of gearing to provide an extra boost. 

“These performance numbers add up to a strong argument for staying invested throughout changes of government, rather than trying to be too clever by timing the market.”

The other long-term winners in Morningstar’s analysis were JPMorgan American (LSE:JAM) with a total return of £53,270; AVI Global Trust (LSE:AGT) £44,979; Law Debenture (LSE:LWDB) £44,895; North Atlantic Smaller Companies (LSE:NAS) £43,580; Finsbury Growth & Income (LSE:FGT)£43,296 and BlackRock Smaller Companies (LSE:BRSC) with £39,469.

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

Ian Cowie is a shareholder in Apple (AAPL) and Canadian General Investments (CGI) 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.

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