Foreword
By Annabel Brodie-Smith
The fields are fresh and green after the weekend’s showers but there’s been lots of spring sunshine to enjoy. The cow parsley has arrived, one of my favourites, sometimes known as Queen Anne’s lace. I like to bring the fields indoors with vases of frothy clouds of cow parsley.
I have been busy moderating panels – smaller companies at the Master Investor Show and Asia at the Aberdeen Investment Trust Forum. We enjoyed meeting so many of you at the Master Investor Show – some great discussions and it was great to see some familiar faces at the Aberdeen event last week. For those of you who are new to investment trusts please do read our guide, How to make your first investment in the stock market.
For those of you who are new to investment trusts please do read our guide, How to make your first investment in the stock market.
It was sad news that Edinburgh Worldwide’s board were finally voted off by Saba and three US institutions. The new board now has to act independently and on behalf of all shareholders - as they have confirmed themselves in an announcement. We will be watching what happens next. Our priority is to achieve reform of the Listing Rules and change company law on voting. We want to make it harder for a minority shareholder like Saba to be able to control the future direction of an investment trust against the wishes of the vast majority of other investors.
Following Artemis II’s first flyby mission to the moon in 50 years, we are focusing on the investment trusts that will allow you to invest in the space race. George Chalmers, Partner at Molten Ventures which has 7% exposure to space believes: “Investing in space now is investing in the systems that will anchor security, resilience, and intelligence for decades to come.”
Seraphim Space invests in listed and unquoted space tech businesses. Their CEO Mark Boggett explains how quickly this area is developing: “On average, our top ten holdings grew revenues by an average of 79% last year, and we are seeing continued valuation progression as these businesses execute at pace.” There’s currently seven investment trusts with exposure to what could be the biggest IPO ever, SpaceX - five investment trusts managed by Baillie Gifford, RIT Capital Partners and HarbourVest Global Private Equity.
There’s good news as the majority of investment trusts have outperformed their open-ended sisters over one, three, five and ten years.
We have been busy analysing the performance of investment trusts and their ‘sister’ open-ended funds run by the same manager with a similar mandate. There’s good news as the majority of investment trusts have outperformed their open-ended sisters over one, three, five and ten years. Over ten years, 77% of investment trusts outperformed funds with the same manager. Over one, three and five years, investment trusts outperformed their sister funds in 82%, 72% and 53% of cases respectively.
There’s a number of reasons for this strong long-term investment trust performance. Investment trusts have a closed-ended structure, which enables their managers to buy and sell assets at the time of their choosing, not when investors buy or sell. They can invest in less liquid assets, such as smaller companies and even private companies, without worrying about having to sell them to meet redemptions. They can also gear, which adds risk but can enhance long-term returns.
But don’t take our word for it, read Ian Cowie’s article which digs deeper into the performance data. Going back to Edinburgh Worldwide, Ian explains this investment trust has delivered total returns of 155% over the last decade, more than three times as much as its open-ended sister Baillie Gifford Global Discovery, which returned 43%.
Everyone – even Sherlock the dog – is looking forward to the end of the exams in mid-June!
Or there’s The European Smaller Companies Trust (ESCT), which delivered 230% over the decade and 15% over one year. By contrast, its sister Janus Henderson European Smaller Companies, also managed by Ollie Beckett, Rory Stokes and Julia Scheufler, delivered 210% and 19% over the same periods. The open-ended sister’s outperformance over that last short period demonstrates that investment trusts do not always do better but often they do. Ian then goes on to explain in depth the features which help investment trusts outperform over time.
It’s currently very quiet in our house as my youngest son, Fabian has just started his GCSEs. We are going to see Jekyll and Hyde tonight – it’s one of his GCSE texts. Everyone – even Sherlock the dog – is looking forward to the end of the exams in mid-June!
I hope you have a lovely month.
Annabel Brodie-SmithCommunications Director, AIC
