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The 28 Investment Trust ISA Millionaires

  investment trust   diy investing   One of my favourite pieces of investment trust research is the AIC’s millionaires list; it shows how much you would have had if you had invested your full ISA allowance into the same trust each year since April 1999, and reinvested any dividends you received. Rather than just showing pure total return figures, it’s a better reflection of the way most of us invest, putting away money each year come rain or shine. It’s also a close match for my own investing career; I’d rather hold a trust for at least 10 years, than flick back and forth between styles, so it suits my sloth-like investment strategy.  

 

Investment company ISA millionaires

 

Investment company AIC sector % return Apr 99 to Jan 21 Total at 31 Jan 21  Kepler Trust Rating Buy it now
Scottish Mortgage Global 2,249 £2,541,100 Growth GB00BLDYK618
Biotech Growth Biotech & Healthcare 2,321 £1,901,581   GB0000385517
Allianz Technology Technology & Media 1,713 £1,837,161 Growth GB0003390720
Pacific Horizon Asia Pacific 3,348 £1,778,352 Growth GB0006667470
JPMorgan China G&I China 2,561 £1,767,284 Growth GB0003435012
Edinburgh Worldwide Global Smaller 958 £1,574,323 Growth GB00BHSRZC82
Polar Capital Technology Technology & Media 1,314 £1,553,346 Growth GB0004220025
HgCapital Trust Private Equity 2,605 £1,552,220   GB00BJ0LT190
BlackRock Throgmorton UK Smaller Companies 1,490 £1,363,990 Growth GB0008910555
Baillie Gifford Shin Nippon Japanese Smaller 1,286 £1,331,163 Growth GB00BFXYH242
Worldwide Healthcare Biotech & Healthcare 2,315 £1,311,467   GB0003385308
BlackRock Smaller UK Smaller 1,311 £1,256,713   GB0006436108
International Biotechnology Biotech & Healthcare 2,044 £1,246,089   GB0004559349
Oryx International Growth UK Smaller 988 £1,243,074   GG00B3BTVQ94
Montanaro European Smaller European Smaller 1,111 £1,208,138   GB0004543517
Aberdeen Standard Asia Focus Asia Pacific Smaller 3,123 £1,198,211   GB0000100767
Herald Global Smaller 970 £1,136,097   GB0004228648
Schroder Asia Pacific Asia Pacific 1,531 £1,113,545   GB0007918872
JPMorgan Smaller UK Smaller 1,327 £1,110,979   GB00BF7L8P11
JPMorgan Emerging Markets Global Emerging Markets 1,608 £1,104,132 Growth GB00B5ZZY915
Standard Life UK Smaller UK Smaller 693 £1,101,928   GB0002959582
Monks Global 909 £1,071,649   GB0030517261
Rights & Issues UK Smaller 1,549 £1,051,067   GB0007392078
Aberdeen New Dawn Asia Pacific 1,983 £1,049,646   GB00BBM56V29
Scottish Oriental Smaller Asia Pacific Smaller 2,839 £1,043,496   GB0007836132
JPMorgan Euro Smaller European Smaller 1,687 £1,040,997   GB00BMTS0Z37
Invesco Asia Asia Pacific 1,045 £1,027,966   GB0004535307
JPMorgan US Smaller N. American Smaller 1,216 £1,009,865   GB00BJL5F346

Source: AIC/Morningstar  

 

The list comes with this very sensible warning: it’s fun to dream of becoming an ISA millionaire and have that ‘what if’ moment, but it’s important to have a diversified portfolio that suits your long-term needs.  

 

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What if indeed

 

  It’s easy to gawp at big numbers like this as Finumus warns in his recent Monevator post on ISA millionaires. My own ‘what if’ moment is that I owned four of these trusts in the late 90s/early 00s but sold out to invest elsewhere (Pacific Horizon, Polar Capital Tech, Worldwide Healthcare, and Schroder Asia Pacific); I suspect I would have built up my small positions had I kept them.

To be fair to my younger impulsive self, I also sold half a dozen other trusts which didn’t do nearly as well and didn’t make the list.  

 

Putting the numbers in context

 

  Had you invested your full allowance since 1999 – a hardly insignificant £246,560 – these trusts would have at least quadrupled your contributions. Remember, many trusts haven’t been around long enough to be included; according to the AIC only 110 of the 392 on its database have been around since April 1999. All alternative asset trusts and most VC and private equity trusts are missing.  

 

Growth has an in-built advantage

 

  The calculation method favours trusts that had stronger returns in the 2010s than the 2000s as their gains would have mostly been made once more money had been invested; thus Edinburgh Worldwide reached £1.6m from a 958% total return, but Scottish Oriental Smaller £1.0m despite a 2,839% total return.

So there’s a strong overlap between the best performers of the last 10 years and this list; also the ISA allowance was just £7k for the 2000s, rising to £10k in 2010, £15k in 2014, and £20k in 2017, thus rewarding the late bloomers.

This means ‘growth’ trusts dominate the list, although the start point works against them being just a year before the dot-com crash when ‘value’ trusts were ascendant.

To put the total return figures in perspective, they vary from 10% a year (Standard Life UK Smaller’s 693%) to 17.5% a year (Pacific Horizon’s 3,348%). Since April 1999, UK markets have returned about 175% (4.6% pa) and world markets around 350% (7% pa); UK inflation has been around 80% (2.7% pa).

 

What’s worked best?

 

Lists like this are useful when it comes to identifying broad themes that have worked well for a long period of time and we can then ask whether these themes can continue to outperform – smaller companies have been the most dominant theme, with 13 out of the 28 trusts investing in tiddlers.

There are small-cap representatives from each of the six sub-sectors: Global, the UK, North America, Europe, Japan, and Asia Pacific, suggesting this trend isn’t a regional one-off; I’ve long been a fan of this sector and of the small-cap effect, so there’s good reason to think this is a trend with legs.

Also small caps are more illiquid, less scrutinised by analysts, and can work well within the structure of investment trusts.

Technology and biotech/healthcare are the two stand-out sectors, although sector specialisation is a minority sport for investment trusts with commodities the only other sector of notable size; financials, infrastructure securities, and environmental — are newer and more sparsely populated.

When it comes to regional focus, Asia Pacific/Japan is the clear winner but then there are nearly twice as many trusts that focus on this region as those that specialise in the Americas and Europe combined.  

 

Management firms of note

 

Baillie Gifford has five names on the list with three of those very near the top; JPMorgan also has five, Aberdeen Standard three and BlackRock and Orbimed two apiece. Launched in 2001, Lindsell Train Investment Trust just misses out but it’s up around 1,900% since then; Finsbury Growth & Income’s UK large-cap focus meant it didn’t quite make the £1m mark, but it is up 700% since Nick Train took over in 2000.

Around half of the trusts have changed management firms over the last two decades; some changes include Baillie Gifford running Edinburgh Worldwide since 2003, Polar Capital taking over Henderson’s technology trust when its management team defected, and JPMorgan assuming its trusts after the takeover of Fleming in 2001.  

 

Long-serving managers

 

According to the Investment Trust Handbook, ten trusts had the same managers for the whole 22-year period since ISAs were introduced; Simon Knott at Rights & Issues can claim bragging rights having been in post since 1984, with other long-servers including Katie Potts at Herald (1994), Austin Forey at JP Morgan Emerging Markets (1994) and Georgina Brittain JP Morgan Smaller (1998).

To underline the risk of choosing a long-tenured manager, two (James Anderson at Scottish Mortgage and Schroder Asia Pacific’s Matthew Dobbs) have recently announced their retirement; it could be reasoned that the best managers are the ones most likely to keep their jobs so perhaps we need to look for trusts where the managers have 10 years or more in charge but are still a decade or so away from normal retirement age.  

 

Changing times

 

I covered an earlier version of this list two years ago and there have been quite some changes! Only an additional £40k in ISA contributions has been added but the range has gone from 19 trusts generating £700k to £1.07m (just one £1m +) to 28 trusts generating £1m to £2.5m; that’s a big hike and another reminder, if needed, of the power of compounding.

Last year’s soaring tech sector pushed all trusts with this focus up the list; Asian trusts have mostly slipped back. The best performer in the 2019 list — Aberdeen New Thai with £1.07m — doesn’t even make this year’s  top 28; TR Property, Acorn Income, BMO Global Smaller Companies, and Invesco Perpetual UK Smaller all departed due to lacklustre recent returns, whilst Pacific Horizon, JPMorgan China G&I, and Edinburgh Worldwide are the highest new entries.

There are two ways to look at how quickly these lists have changed: Either you could argue that two years is nothing in investment terms, so the fact there has been so much change means we should pay it little attention; or that it’s been such an unusual period, with returns varying much more than they would normally do and we should focus on the fact the majority of the 2019 list is still present and that the main themes of smaller companies, tech, biotech/healthcare, and Asia continue to dominate.

The truth is probably somewhere in between; if the list is repeated in future years, how it evolves over time should be illuminating and highlight the more consistent performers.  

 

How open-ended fund compare since ISAs began

 

Laith Khalaf of AJ Bell produced a similar piece of research, covered in recent articles on Trustnet and ThisIsMoney; it focused on total returns from 6 Apr 1999 to 15 March 2021, rather than the annual contribution method used by the AIC.

The top 10 open-ended funds returned between 1,358% and 3,513% with Marlborough Special Situations run by the highly respected Giles Hargreave taking the top spot.

Seven smaller company funds, two China funds, and a biotech specialist make up the top 10, displaying common themes with the list of closed-end funds; this table looks at the performance of the average small-cap fund and the average all companies fund over the main regions:  

 

 

Region/Country All companies Small companies
UK 191% 757%
Europe 287% 803%
N. America 290% 756%
Japan 168% 392%

Source: Financial Express  

 

Again, small caps have delivered extra oomph in all regions across the globe, with Europe and North America neck and neck over this long period.

The top 10 best-performing investment trusts ranged from 2,203% to 3,307% with Gresham House and Primary Health Properties the only entries in the study not included on the AIC’s ISA millionaire list.

Although the best-performing open-ended fund beat all the investment trusts, the second-placed open-ended fund generated 1,902% and wouldn’t have made it into the closed-end top 10. It’s more anecdotal evidence that investment trusts tend to have the edge over their much better-marketed open-ended cousins.

 

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