Investment trusts arethe unsung heroes of the stock market. Now rebranded as investment companies, they lack the marketing firepower of the major unit trusts and are more complexto understand, but the best of them have thrashed the market.
The following three big names have been around for decades with a proven track record of success. All three are now numbered amongthe top five most traded investment trusts, according to Interactive Investor, and once you see how theyve performed, youll understand why.
Scottish Mortgage Trust
Andthe winner is Scottish Mortgage Trust (LSE: SMT). This 4.5bn mega trust, launched more thana century ago in 1909 when Edward VII was on the throne, has delivered stunning growth of 176% over the past five years, according to Trustnet.com. Thats three times the return on theiShares FTSE 100 exchange traded fund (ETF), which delivered49% over the same timescale. Sometimes active management is worth paying for.
Not that Scottish Mortgage Trust is particularly expensive, with no initial fee and an ongoing charges figure (OCF)totallingjust 0.51% a year (iShares FTSE 100 charges 0.07%). The trust invests in a global spread of equities, with 46% exposure to the booming US market. Top US holdings include Amazon, Tesla Motors and Facebook. Its roughly 25% invested in Europe, including a stake in Ferrari, and 18% in China, where it holdsBaidu and Alibaba. This top quartile fund trades at a premium of 2.3% to net asset value, but thats the price you pay for success.
Witan Investment Trust
Scottish Mortgage Trust isnt the only big beast out there.Witan Investment Trust (LSE: WTAN) was also launched in 1909 and now manages assets totallingnearly 1.6bn. Manager Andrew Bell has forced through a successful turnaround plan, adopting a multi-manager approach with 12 investment managers following six different mandates. The result: a whopping 120% return over five years.
Witan is41% invested in the UK, with holdings such asthe London Stock Exchange, spirits giant Diageo and, ahem, BT Group. Its 25% invested in the US, 16% in Europe and the rest in international stocks. Its slightly more expensive than Scottish Mortgage Trust, with a total expense ratio of 0.87% a year, but fewwill be complaining given recent performance, and it trades at a 4.63% discount. However, its UK focus could make it vulnerable to any Brexit slowdown.
Finsbury Growth & Income Trust
Finsbury Growth & Income Trust (LSE: FGT) is a relative minnow with 968m under management, and a parvenu upstart to boot, launched in 1926. While the first two trusts have a roaminginternational remit, Finsburyis 100% invested in UK stocks, and that has done it no harm at all, with a total blockbusting returnof 116% over the past five years.
The fund isrun by alpha manager Nick Train, the manbehindthe hugely popular CF Lindsell Train UK Equity fund (which is up 113% over five years). He hasa proven track record in rising and falling markets. Top holdings include RELX, Diageo, Unilever, London Stock Exchange,Burberry andSchroders. Its OCF is 0.8% a year, the premium is 0.36%, yield is 2.02%. Again, it will take a hit if the UK market dips, but right now Train is on a roll.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com, Facebook, Tesla Inc, and Unilever. The Motley Fool UK has recommended Burberry and Diageo. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.