Interactive Investor

2014's specialist investment trust tips win out

12th January 2015 10:13

Rebecca Jones from interactive investor

Selected for us by a panel of experts last January, our tipped investment trusts put in a good innings throughout 2014.

All but two delivered positive share price returns in a year that proved difficult for many mainstream UK and global equity markets. Our panel not only picked the right areas of the market, but also avoided the worst.

Not a single UK or European smaller companies trust - two of the poorest performing sectors last year - made it into our selection. Of those that did make it, our biotechnology, infrastructure and country specialist Asia Pacific trusts were some of the stand-out winners.

In the first category, Biotech Growth Trust was the best-performing selection by a country mile. Continuing its run of outstanding performance, it delivered a staggering 62% share price total return in the year to 1 December 2014, while its net asset value (NAV) swelled 42% over the same period.

Clever analysts

It was selected by Peter Hewitt, manager of the F&C Managed Portfolio investment trust. He explains that Biotech Growth has benefited from a pickup in the sector over the past few years following the release of a number of new "blockbuster" drugs.

Nonetheless, he believes that Biotech Growth has a particular edge: "The people that run this, US firm OrbiMed, have a lot of very clever analysts who crawl all over new drugs and make the right judgements on their value." Hewitt has made the trust one of his selections for this year too (see January's edition of Money Observer).

Hewitt also chose our strongest performing infrastructure trust pick of the year, 3i Infrastructure, which returned 21% in share-price terms in the year to 1 December, following a surprisingly strong set of NAV results issued in September.

He says the trust benefits particularly from its direct involvement with large infrastructure projects and its lack of exposure to Public Private Initiatives (PPI), meaning it has more growth potential than many other infrastructure trusts while still paying an attractive 4.6% dividend yield.

Asia Pacific selections

Of our Asia Pacific trusts, Fidelity China Special Situations - launched by investment legend Anthony Bolton in 2010 to a slow start - was the strongest performer.

In the year to 1 December the NAV grew 32%, while shares delivered close to 25% as Bolton's successor Dale Nicholls continues to turn the trust around.

Tim Cockerill, investment director at Rowan Dartington, selected the trust and remains bullish: "It focuses on the mid cap, the small cap and the domestic part of the Chinese economy, which is really where you want to be as the government shifts the economy away from resource-based manufacturing."

In stark comparison stands First State's Scottish Oriental Smaller Companies, chosen last year by Brooks MacDonald's Robin McAdam for its team's "enviable track record and experience".

The trust came in bottom of the Asia Pacific ex Japan sector in the year to 1 December, with a 5% share price return compared to an average of 12% from the sector as a whole. However, this is largely due to an early 2014 sell-off in risky assets. The trust's NAV is actually up 13% over the year.

Mainstream picks

Among our more mainstream selections, Mark Barnett's Perpetual Income and Growth trust fared particularly well, delivering 15% in share price returns and 13% in NAV to 1 December while growing its aggregate full-year dividend from 11.5p in 2013 to 13.9p at the end of 2014.

As Cockerill observes, this is likely to be a relief for those who were concerned that the trust might suffer from a lack of attention after Barnett took over Neil Woodford's former Invesco Perpetual funds in March.

Global equity income trust Murray International also did well, returning 8% to shareholders. However, Hewitt is not sure it's worth the current 7% premium.

Some of the steadiest returns among mainstream selections were achieved by John Newlands, head of investment trust research at Brewin Dolphin. His three tips made average gains of just over 14%: Finsbury Growth & Income (12%), Hansa Trust 'A' (15%) and RIT Capital Partners (17%).

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.