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Hedge Funds investment trust sector wows in 2020


Hedge Funds is the top-performing investment company sector in the year to date, new data from the Association of Investment Companies (AIC) has revealed.

The sector produced a 56% return in the 11 months to November compared to the average investment company’s return of 8% over the same period. The Hedge Funds sector includes Pershing Square Holdings, the fifth best-performing investment company in the year to date, recently promoted to the FTSE 100.

Technology & Media achieved the second-highest return of 42%, followed by Global with 36%. Japanese Smaller Companies (32%) and Japan (28%) complete the top five sectors reflecting a strong rebound from the pandemic lows.

“Despite the beginning of the year being a very challenging time for markets, investment companies have bounced back strongly from the March crash,” said Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC). “Hedge funds have performed remarkably well, with volatile markets being helpful to many of their strategies. They were among the investment companies that held up best in the tough first quarter of the year and they have lived up to their name by preserving capital in deeply uncertain times.”

Pacific Horizon was best performing investment company

Investment companies in the Technology & Media sector have performed very healthily too and it’s easy to understand why. From Zoom drinks to online groceries, technology has been a lifeline this year and helped us to stay connected to friends and colleagues through lockdowns and restrictions.

Though this year’s top-performing sectors tell an interesting story, it’s important to remember that investment is about the long term. Building a balanced portfolio of investments which suits your needs, rather than just focusing on today’s winners, is what’s most important.

Pacific Horizon was the best-performing investment company over the 11 months to 30 November with an impressive return of 115%. The top three performing investment companies are all managed by Baillie Gifford, with Baillie Gifford US Growth and Scottish Mortgage second and third respectively.

“Performance has been very strong for the majority of our managed trusts this year, based on operational progress at many of our holdings,” said James Budden, Director of Marketing and Distribution at Baillie Gifford. “Scottish Mortgage in particular has seen a spectacular rise in its share price since March. All this makes sense once one examines the effects of lockdown measures – more ecommerce, more food delivery, more online entertainment, more online communication for work and school, an emphasis on healthcare and more computing power required to make this all work. These themes are well represented within stocks held by our trusts.”

Baillie Gifford managers are thinking about how much of this increased demand that has been brought forward by necessity is merely speeding up eventual adoption, versus how the investment case has strengthened and expanded.

Budden says the fund manager is long-term in its approach and the team there are busy considering more enduring themes around industries embracing the digital revolution, the rise of the middle class in Asia, technology evolving from the screen to the street, the potential of climate change technologies and rapid change in healthcare all of which should provide exciting growth opportunities for investment in the future.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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