Which investment trusts delivered top returns to shareholders in 2015? Closed-end funds invested in smaller companies across developed markets topped the performance charts – but will they live to fight another day?
Savvy investors after all know past performance is no indicator of future returns – however a Gold, Silver or Bronze Morningstar Analyst Rating is. Trusts with a positive medal rating are deemed more likely to outperform their peer group across the medium term. Using the free Morningstar Investment Trust Screener we have identified the best performing closed-end funds of 2015, and then filtered out those that analysts do not have conviction in. As a result here are the five highest rated, best performing funds of 2015.
Standard Life UK Smaller Companies (SLS)
Return YTD: 37%
Morningstar analysts think Gold Rated Standard Life UK Smaller Companies is a strong offering. Fund manager Harry Nimmo remains a key strength. He is an experienced small-cap investor who has managed money in this style through a variety of market cycles. He has run this fund since September 2003 and its open-ended sister fund since 1997, remaining true to his philosophy throughout.
BlackRock Throgmorton (THRG)
Return YTD: 35%
This Silver Rated trust is a proven fund with managers using a tried-and-tested process. Manager Mike Prentis looks for sustainable growth companies that are undervalued and meeting management is a key part of the process. He’s not afraid to dip right down the market-cap scale and AIM-listed companies have been a regular feature in this fund, although this exposure was scaled back when the fund’s benchmark was changed in late 2013. That said, it’s still around one third of assets and that adds liquidity risk to the portfolio.
BlackRock Smaller Companies (BRSC)
Return YTD: 32%
There are many reasons that lead Morningstar analysts to think highly of BlackRock Smaller Companies – which they rate Gold. They like the team’s process, which is applied consistently across all their mandates. They look for sustainable growth opportunities that meet five key criteria; not all five need to be met at the time of purchase, but the expectation is that they will ultimately do so. A key part of this process is meeting with management and to that end the team sees around 700 companies each year.
Montanaro European Smaller Companies (MTE)
Return YTD: 32%
The Silver Rated Montanaro European Smaller Companies Trust continues to benefit from a well-resourced team dedicated to Pan-European small-cap research. The investment process has proved consistent, delivering a solid performance profile through time. George Cooke, the manager of the fund, seeks the highest-quality, growth-oriented stocks. Despite recent team changes and a period of weaker relative returns, Morningstar fund analysts retain conviction in the fund given its consistent approach and strong resources.
Jupiter European Opportunities (JEO)
Return YTD: 27%
Morningstar fund analysts think Jupiter European Opportunities is a compelling choice for European equities. Since the fund's launch in 2000, it has returned on average 13.2% a year, some 8 percentage points more than its average Europe flex-cap equity Morningstar Category peer. Not only that, the manager has achieved consistent outperformance in every year bar 2008, when gearing exacerbated the market falls.
The board is keen to avoid a repeat of that year, when gearing reached around 60% as the total value of assets fell; these days it's more common to see it in low double digits, and the manager uses a revolving loan facility so the brakes can be applied swiftly.
