A total of 32 investment trusts would have made investors more than £1 million if they had invested the full annual ISA allowance in the same trust each year, according to new research from the Association of Investment Companies (AIC).
Investing the full ISA allowance annually from 1999 to 2023, a total of £306,560, and reinvesting the dividends into either of the two top performers, HgCapital Trust and Allianz Technology Trust, would have generated a tax-free pot of over £2 million by 31 January 2024.
Technology is a strong theme for investment trusts
Technology is a strong theme among the top four investment trusts, with the fifth investing in Asian smaller companies. HgCapital Trust, which invests in unquoted software and technology services businesses, returned £2,254,391. Allianz Technology Trust and Polar Capital Technology, which both invest in a global portfolio of technology companies, returned £2,095,955 and £1,912,656 respectively. Scottish Mortgage, a global trust with a growth-focused mandate, returned £1,639,261. Scottish Oriental Smaller Companies, which returned £1,538,589, invests mainly in smaller Asian quoted companies.
Two of the top five performers – HgCapital Trust and Scottish Mortgage – invest at least part of their portfolio in unquoted companies.
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Among the 32 “ISA millionaire” investment trusts, 12 focus on smaller companies. Four of them are from the UK Smaller Companies sector with BlackRock Throgmorton Trust performing best of these, returning £1,214,138 to take tenth place in the table. Three of the “ISA millionaire” investment trusts are from the Asia Pacific Smaller Companies sector, of which the best performing is Scottish Oriental Smaller Companies. A further three are from the European Smaller Companies sector, of which European Smaller Companies is the best performing, returning £1,112,995.
The top 10 in the AIC’s investment trust list
- Hg Capital Trust
- Allianz Technology Trust
- Polar Capital Technology
- Scottish Mortgage
- Scottish Oriental Smaller Companies
- abrdn Asia Focus
- JPMorgan American
- Pacific Horizon Investment Trust
- JPMorgan Global Growth & Income
- BlackRock Throgmorton Trust
Taking a long term approach
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “It’s been a challenging time for investors recently, with high inflation coupled with geopolitical tensions and an uncertain outlook. In difficult times, it’s important for investors to take a long-term approach to their investments.”
Investment trusts have been in existence for more than 155 years, surviving two World Wars, the Great Depression, the 1970s era of high inflation, the tech boom (and bust), the financial crisis and the pandemic. They have a fixed pool of capital which means investment trust managers can take a long-term view of their portfolio, holding on to assets during market downturns, rather than being forced to sell them at cheap prices.
“Our research shows that despite the current challenging economic environment, 32 investment trusts would have returned more than £1 million for ISA savers who invested their entire allowance each year since 1999 – with two returning more than £2 million,” said Brodie-Smith. “When investing, it’s vital to spread your risk, as no-one knows which will be the best performing investment trusts in the future. A diversified portfolio which meets your needs is the best way to success over the long-term. If investors are in doubt about which trust is right for them, it’s important to speak to a financial adviser.”
Jim Strang, Chairman of HgCapital Trust (HgT), said: “It is very heartening that the company has been able to deliver such compelling gains for shareholders over the last 25 years. This is a solid endorsement of the private equity model and the skill and expertise that the Manager, Hg, has employed so successfully over this time.”
HgT provides shareholders with unique listed access to the investment portfolio of Hg. The performance that HgT has delivered has come from the continual refinement and focus on a clear investment model implemented by Hg, targeting software and services leaders that transform how people work. These companies typically benefit from strong recurring revenue streams and high margins, and operate in fragmented markets, allowing growth to be accelerated further via M&A. Hg strives to do the same thing better, every time.
Mike Seidenberg, Portfolio Manager of Allianz Technology Trust, said: “Meeting with your customers digitally – for both businesses and consumers – is paramount, particularly in a post-pandemic era. Identifying companies solving some of the world’s most difficult problems (such as global warming, access to and processing of data, cybersecurity, etc.) is germane to the Allianz Technology Trust investment process. Our team-oriented approach has identified secular themes over multiple years and cycles and, through a rigorous investment process, our goal is to continue doing so going forward. Technology has and should continue to create unique advantages, and Allianz Technology Trust’s job is to identify the risk/reward of these companies for our shareholders.”
Ben Rogoff, Lead Manager of the Polar Capital Technology Trust, said: “We focus on identifying key technology themes and companies exposed to important secular trends, while doing our best to avoid hubris – which is more difficult than it sounds when investing in a sector where hype cycles are endemic! For us, that means avoiding both early-stage investments and ‘cheap’ value stocks as well as constructing diversified portfolios that combine our highest conviction ideas with the best the index has to offer. This approach has worked well for us over the past two decades, allowing us to participate in most, if not all, of the sector’s biggest success stories.”
The 32 “ISA millionaire” investment trusts
| Rank | Trust name | AIC sector | % share price total return 06/04/1999 to 31/01/2024 |
Total ISA investment value at 31/01/2024 |
|---|---|---|---|---|
| 1 | HgCapital Trust | Private Equity | 3,700 | £2,254,391 |
| 2 | Allianz Technology Trust | Technology & Technology Innovation | 1,894 | £2,095,955 |
| 3 | Polar Capital Technology | Technology & Technology Innovation | 1,573 | £1,912,656 |
| 4 | Scottish Mortgage | Global | 1,366 | £1,639,261 |
| 5 | Scottish Oriental Smaller Companies | Asia Pacific Smaller Companies | 4,024 | £1,538,589 |
| 6 | abrdn Asia Focus | Asia Pacific Smaller Companies | 3,742 | £1,491,435 |
| 7 | JPMorgan American | North America | 889 | £1,413,500 |
| 8 | Pacific Horizon Investment Trust | Asia Pacific | 2,334 | £1,303,270 |
| 9 | JPMorgan Global Growth & Income | Global Equity Income | 923 | £1,268,898 |
| 10 | BlackRock Throgmorton Trust | UK Smaller Companies | 1,252 | £1,214,138 |
| 11 | Worldwide Healthcare Trust | Biotechnology & Healthcare | 1,999 | £1,197,232 |
| 12 | International Biotechnology | Biotechnology & Healthcare | 1,846 | £1,194,730 |
| 13 | Fidelity European Trust | Europe | 1,725 | £1,188,448 |
| 14 | Biotech Growth Trust | Biotechnology & Healthcare | 1,317 | £1,169,361 |
| 15 | Canadian General Investments | North America | 1,439 | £1,159,765 |
| 16 | BlackRock Smaller Companies | UK Smaller Companies | 1,138 | £1,157,120 |
| 17 | Mid Wynd International | Global | 1,182 | £1,142,541 |
| 18 | Rights & Issues Investment Trust | UK Smaller Companies | 1,588 | £1,134,352 |
| 19 | JPMorgan UK Smaller Companies | UK Smaller Companies | 1,268 | £1,123,473 |
| 20 | European Smaller Companies | European Smaller Companies | 906 | £1,112,995 |
| 21 | JPMorgan European Discovery | European Smaller Companies | 1,664 | £1,087,689 |
| 22 | JPMorgan US Smaller Companies | North American Smaller Companies | 1,238 | £1,086,589 |
| 23 | Herald Investment Trust | Global Smaller Companies | 855 | £1,077,135 |
| 24 | JPMorgan Indian | India/Indian Subcontinent | 1,778 | £1,076,331 |
| 25 | Montanaro European Smaller Companies | European Smaller Companies | 917 | £1,066,051 |
| 26 | ICG Enterprise Trust | Private Equity | 580 | £1,065,553 |
| 27 | AVI Global Trust | Global | 1,482 | £1,058,026 |
| 28 | Fidelity Asian Values | Asia Pacific Smaller Companies | 806 | £1,055,507 |
| 29 | BlackRock World Mining Trust | Commodities & Natural Resources | 1,853 | £1,037,056 |
| 30 | Pantheon International | Private Equity | 1,017 | £1,027,265 |
| 31 | F&C Investment Trust | Global | 681 | £1,007,460 |
| 32 | Henderson European Focus Trust | Europe | 745 | £1,005,182 |
Source: www.aic.co.uk / Morningstar. % share price total return is for a single lump sum invested at the beginning of the period. Total ISA investment value is the total value of an investment on 31/01/2024 if the maximum ISA limit for each year had been invested annually from 1999 to 2023, with the investment being made on 6 April each year.
