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Gold and Commodities Top Performing Trusts of 2016

Mining stocks lead the way year to date, with commodities and natural resources as the top performing investment trust sector of 2016

The Association of Investment Companies (AIC) 13 December, 2016 | 11:44AM

This article is part of Morningstar's Guide to Alternative Investing; providing everything you need to know about property, commodities, infrastructure and other diversifying assets. 

The saying goes that all that glitters is not gold, but after a year of political shocks and uncertainty, it seems that investment companies with exposure to the shiny stuff – whether gold, precious metals, or natural resources have made a comeback.

The top performing investment company sector over the year to date is Sector Specialist: Commodities and Natural Resources, up 72% – something of a respite for a sector that has fallen in each of the previous four calendar years.

Given the post Brexit referendum sterling weakness, it is not surprising to see overseas focussed investment companies also leading the way in performance terms over the year to date, with North America the second top performing sector, up 34%, followed by Global Emerging Markets and Global Equity Income, each up 31%, and Country Specialists: Asia Pacific, up 28%.

UK Smaller Companies Fail to Deliver

Closed-end funds has had a good year in share price total return terms, with the average investment company up 12%, no doubt boosted by the sector’s high overseas exposure. But it has not all been plain sailing, and UK focussed investment companies post the referendum have had a more difficult time, with the UK Smaller Companies sector down 10% and the UK All Companies sector down 4%.

Conversely, in 2015 the reverse was true: the UK Smaller Companies sector outperformed the average investment company by 15 percentage points in the previous year to 30 November 2015, whilst the UK All Companies sector beat the average investment company by 12 percentage points over the same timeframe.

Investment Company Top Performers

It is perhaps no surprise to see a number of companies from the Sector Specialist: Commodities & Natural Resources amongst the top performing AIC members over the year to date. BlackRock World Mining was the second top performing AIC member, up 95%. JPMorgan Russian Securities (JRS), from the Country Specialists: Europe sector also made a comeback and was the third best performer. This was followed by Riverstone Energy (RSE), also from the Sector Specialist: Commodities and Natural Resources sector.

It’s been a year of surprises, and investment company performance has consequently had its ups and downs but performance for the sector as a whole has been resilient over the year. Sectors that had a challenging time in 2015, like Commodities and Natural Resources and Global Emerging Markets, are this year’s come back kids, with some UK focussed sectors having a more difficult time given sterling’s weakness.

2016 highlights the importance of having a balanced portfolio and a long-term view. One year’s underperformers can be the next year’s winners showing how important it is not to react to short-term market movements.

The investment company sector houses a broad variety of sectors, risk profiles and geographical exposure, and investors need to consider their investment objectives and risk profile when looking at potential investments. Some investors might like to consider monthly investing to help smooth out some of the highs and lows in the price of shares. If investors have any concerns they should speak to a financial adviser.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
JPMorgan Russian Securities Ord497.05 GBX0.36
Riverstone Energy Ord1,231.00 GBX0.00
About Author The Association of Investment Companies (AIC)

The Association of Investment Companies (AIC)  was founded in 1932 and represents a broad range of closed-ended investment companies, incorporating investment trusts and VCTs.