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10 Best Performing Investment Trusts of 2017

Asia-focused investment trusts dominate this year's top performers list, with seven of the top 10 investing in the region

David Brenchley 21 December, 2017 | 1:57PM

Asia has been a land of opportunity for investment trust managers in 2017

Asia-focused offerings dominate the list of best-performing investment trusts in 2017 on a total return basis, according to data from Morningstar Direct.

Of the top 20 performers, 12 invest in the region, with seven of those in the top 10. Many have big exposure to Chinese technology duo Alibaba (BABA) and Tencent (00700), which have more than doubled their share prices this year.

Unsurprisingly, equities have dominated bonds over the past 12 months and Japanese smaller companies in particular have performed well. Elsewhere, two technology trusts are in the top 10, as are two global offerings.

JPMorgan Chinese (JMC)

This Morningstar Bronze-rated trust has returned 52.4% in total returns in the year-to-date, thanks partly to its top two holdings, Alibaba and Tencent, which account for almost a fifth of its £218 million of assets.

This year has provided relief for manager Howard Wang, who had seen his trust sitting in the third or fourth quartile of the eight-strong Asia Pacific ex Japan sector between 2014 and 2016 and lagging the sector average.

But Morningstar analyst Germaine Share notes this was due to Wang’s growth preference being out of favour, especially last year when value sectors such as energy and materials rallied. The portfolio has overweight exposures to the consumer discretionary and healthcare sectors.

It currently trades on a discount of just under 4.9%, compared to its 10-year average of 8.9% and has an ongoing charge figure of 1.4%.

Independent Investment Trust (IIT)

While this is a global trust and can invest in international quoted securities, it is mainly invested in UK equities. It has returned 48.5% year-to-date and has a five-star performance rating, comprehensively outpacing its benchmark every year since 2012 bar last year.

Manager Max Ward runs a high-conviction portfolio of 30 stocks, with tonic drinks maker FeverTree (FEVR) the largest holding, followed by automation specialist Blue Prism (PRSM).

This pair have returned 88.6% and 178% year-to-date respectively. However, Ward has been taking profits in recent months. The fund bought both early on in their tenures as listed entities so has made more than 10 times its initial investment.

Other top holdings include FTSE 250 housebuilder Redrow (RDW), online travel retailer On The Beach and equipment rental firm Ashtead (AHT).

It currently trades on a premium of 8.5%, compared with a 10-year average of a 7.3% discount. It has an ongoing charge figure of 0.34%.

Pacific Horizon (PHI)

This Baillie Gifford-managed trust can invest across the Asia Pacific region excluding Japan and currently has just over a third in China and a quarter invested in South Korea.

The top two holdings, again, are Alibaba and Tencent. In fact, over half the portfolio is invested in technology names. The third largest is Sunny Optical Technology (02382), a Chinese designer and manufacturer of optical-related products.

Car maker Geely (00175) and e-commerce firm JD.com (JD) complete the top five of Roderick Snell’s fund, which has returned 47.2% in 2017.

It currently trades at a discount of 6.3%, compared to its 10-year average of 8.4% and has an ongoing charge figure of 1.07%.

Baillie Gifford Shin Nippon (BGS)

Another offering from the high-quality Baillie Gifford stable, Shin Nippon – which means New Japan – is another serial outperformer, having beaten its benchmark for seven of the past eight years.

Managed since 2011 by Praveen Kumar, Shin Nippon has returned 45.6% by investing in Japanese smaller companies.

Internet retailers Yume No Machi Souzou Iinkai (2484) and Start Today (3092) are the top two holdings, followed by outsourcer Outsourcing (2427) and merger and acquisition brokerage Nihon M&A Center (2127).

It currently trades on a premium of 12.9% compared to its 10-year average of -4.5%. It has an ongoing charge figures of 0.96%.

Allianz Technology Trust (ATT)

Managed by Walter Price from his San Francisco base, Allianz Technology has been well placed to benefit from the outperformance of the large tech stocks. Its top holdings include Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Facebook (FB) and Alphabet (GOOGL), amongst other less familiar names.

Chipmaker Micron Technologies (MU) is the third largest, with mobile payment firm Square (SQ) and IT specialist DXC Technology (DXC) fifth and seventh. US companies account for four-fifths, while it holds relatively small positions in the UK’s Sophos (SOPH), Micro Focus (MCRO), Blue Prism and Alfa Financial Software (ALFA).

The trust has returned 43% in 2017 so far, almost double the 27% it gained in 2016.

It currently trades on a small premium of 1.81%, but its 10-year average is a discount of 6.66%. This is the first time since 2013 it has traded on a premium of any sort. The ongoing charge figure is 1.03%.

Best of the Rest

Other top performers in the year include Atlantis Japan Growth (AJG), managed by Tiburon Partners, in sixth with returns of 42.7%.

The ever-popular Morningstar Gold-rated Scottish Mortgage (SMT), the third Baillie Gifford-run trust in the top 10, returned 42.3% to add to its already-impressive long-term returns thanks to investments in the likes of the FANGs and BATs (Baidu, Alibaba and Tencent).

The next two were country specific funds, with India Capital Growth (IGC) and Vietnam Enterprise (VEIL) gaining shareholders 42.2% and 42.1% respectively. Vietnam’s Ho Chi Minh stock exchange has been one of the best performing in recent years, up 140% over the past five years and 43.5% year-to-date.

JPMorgan Asian (JAI) rounds out the top 10.

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
Alfa Financial Software Holdings PLC545.00 GBX0.93-
Alibaba Group Holding Ltd ADR183.83 USD0.78
Allianz Technology Trust Ord1,207.50 GBX-0.82
Alphabet Inc A1,139.10 USD0.74
Amazon.com Inc1,295.00 USD-0.76
Apple Inc179.10 USD1.65
Ashtead Group PLC2,146.00 GBX0.52-
Atlantis Japan Growth Ord231.00 GBX0.00
Baillie Gifford Shin Nippon Ord921.00 GBX0.55
Blue Prism Group PLC1,120.00 GBX1.45-
DXC Technology Co100.61 USD-0.45
Facebook Inc A177.58 USD-0.45
Fevertree Drinks PLC2,122.00 GBX-0.05-
Geely Automobile Holdings Ltd24.80 HKD-3.69-
Independent Ord681.00 GBX-0.73
India Capital Growth Ord118.75 GBX-0.42
JD.com Inc ADR46.61 USD0.32
JPMorgan Asian Ord375.50 GBX0.00
JPMorgan Chinese Ord325.00 GBX-1.66
Micro Focus International PLC2,175.00 GBX-2.51-
Micron Technology Inc44.26 USD3.12
Microsoft Corp90.14 USD2.03
Nihon M&A Center Inc5,970.00 JPY0.00-
OUTSOURCING Inc1,943.00 JPY-1.67-
Pacific Horizon Ord337.00 GBX0.00
Redrow PLC640.00 GBX-0.39-
Scottish Mortgage Ord463.60 GBX-1.07
Sophos Group PLC642.00 GBX-1.53-
Square Inc A40.06 USD1.88
Start Today Co Ltd3,225.00 JPY-1.23-
Tencent Holdings Ltd447.00 HKD-0.45
Vietnam Enterprise Ord463.00 GBX-0.64-
Yume No Machi Souzou Iinkai Co Ltd2,236.00 JPY-1.93-
About Author David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk