The 10 best-performing trusts of 2016

The chances are the average investor will have failed to back or only have a small amount of exposure to the vast majority of investment trusts that topped the performance league tables in 2016.

The key overriding theme has been the strong recovery in commodity prices. Mining shares, which had been deeply out of favour at the beginning of the year, become one of the best-performing stock market sectors.

The oil price is currently hovering above the $50 a barrel mark, having recovered from hitting a low of $28 earlier this year. Last month the oil price enjoyed a boost following an agreement by members of the Organisation of the Petroleum Exporting Countries (OPEC) to put its first limit on oil output since 2008.

High-risk areas

The Baker Steel Resources trust, which tops the leaderboard year-to-date (up to 19 December), has been at the forefront of the recovery, posting share price gains of 93%.

The trust invests in the highly speculative area within what is a higher-risk sector, with a large proportion of unlisted businesses that focus on exploration.

"But if we put this performance in context we see that, despite a rally of over 90% in 2016, this trust is still showing a loss of 65% over five years," notes Gavin Haynes of wealth manager Whitechurch Securities.

The second best-performing trust in 2016, returning 88%, was a portfolio that provides more mainstream exposure to mining stocks - Blackrock World Mining.

Elsewhere, Russia has perhaps been the surprise package in emerging markets over the past year. The JPM Russian Securities Investment trust, which has been the fourth best-performing trust of 2016, captured the strong rally in the stock market and the rouble.

Valuations in Russia still look cheap and this market could benefit from Trump's presidency, because a thawing of US-Russian relations could provide a significant boost to Russian companies and those oligarchs who own them.

"The currency and stock market have proved robust since the election result was announced. But this is a trust only suitable as a small position in higher-risk portfolio," says Haynes.

The 10th best-performing trust was Lindsell Train, which provides exposure to a focused portfolio of blue-chip companies and is managed by Michael Lindsell and Nick Train.

It has a focus on global leading consumer brands and it also has a significant stake in the Lindsell Train Investment boutique, which is performing strongly and has boosted returns.

The trust's premium is sky-high, at 66%, which is above its 12-month average premium figure of 40%.

 This article was originally published in our sister magazine Money Observer. Click here to subscribe.

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.