In this piece we update our sector-by-sector research on investment trusts, including the latest key performance and risk numbers. There are some interesting results coming out, and some fantastic returns, but it’s certainly not a black and white picture.
We know that using Dynamic Fund Ratings increases your potential. In 2019 we extended our research to see whether applying Dynamic Fund Ratings to a combined universe of unit trusts (UTs) and investment trusts (ITs) improved performance relative to unit trusts on their own. Here we update that research from 2019 with the latest findings.
We have focused our research on three popular UT/IT sectors: UK All Companies, UK Smaller Companies and Asia Pacific ex-Japan.
Below we show charts and tables summarising our research for the period July 2004 to present.
Each section covers:
- What we did
- Did combining ITs and UTs add to performance?
- Performance chart for the period showing the combined portfolio of UTs and ITs (red line), the UT-only portfolio (green line) and the index (blue line)
- The performance and risk stats in a table, plus how much the portfolio outperformed the index
Here’s the detail, sector-by-sector.
UK All Companies
What we did: We combined funds in the UT and IT UK All Companies sectors. We then applied the usual Dynamic process to this combined universe of funds, creating a Top 3 portfolio on a 6-month review cycle.
Does combining ITs and UTs add to performance vs UTs alone? Adding in ITs does not generate any extra performance compared to the UT-only portfolio. ITs also add to the risk. The UT-only version is our
Dynamic UK All Companies Portfolio, which has seen 264% extra growth vs the index over the period.
Chart 1
Table 1
|
Name
|
Total Return
|
Worst Month
|
Worst Year
|
Performance gain vs Index
|
|
UT Dynamic UK All Portfolio
|
458.3%
|
-24.7%
|
-34.8%
|
+264%
|
|
IT UT Dynamic UK All Portfolio
|
211.4%
|
-28.9%
|
-38.8%
|
+17%
|
|
FTSE 100
|
194.4%
|
-13.4%
|
-28.3%
|
-
|
UK Smaller Companies
What we did: We combined funds in the UT and IT UK Smaller Companies sectors. We then applied the usual Dynamic process to this combined universe of funds, creating a Top 3 portfolio on a 6-month review cycle.
Does combining ITs and UTs add to performance vs UTs alone? There isn’t much in it between the combined ITs and UTs portfolio and the UT-only portfolio in terms of performance and risk. The UT-only portfolio slightly outperforms – this is a reversal of what we saw back in 2019 when the ITs and UTs portfolio led by a narrow margin. Nonetheless, both portfolios provide a substantial uplift over the index return (+675% and +582%).
Chart 2
Table 2
|
Name
|
Total Return
|
Worst Month
|
Worst Year
|
Performance gain vs Index
|
|
UT Dynamic UK Smaller Portfolio
|
948.1%
|
-21.4%
|
-41.5%
|
+675%
|
|
IT UT Dynamic UK Smaller Portfolio
|
854.6%
|
-21.4%
|
-40.2%
|
+582%
|
|
FTSE Small Cap (ex-IT)
|
272.7%
|
-25.8%
|
-48.3%
|
-
|
Asia Pacific ex-Japan
What we did: We combined funds in the UT and IT Asia ex-Japan sectors. We then applied the Dynamic process to this combined universe of funds. We created Top 3 and Top 1 portfolios on both 6-month and 3-month review cycles.
Did combining ITs and UTs add to performance vs UTs alone? The combined ITs and UTs portfolio is the standout here, achieving 978% extra growth vs the index and 144% extra growth vs the best UT-only portfolio, plus with less risk. This impressive portfolio is our
Dynamic Asia (incl. ITs) Portfolio, which selects the Top 1 fund every 6 months from the IT/UT Asia ex-Japan sectors.
Chart 3
Table 3
|
Name
|
Total Return
|
Worst Month
|
Worst Year
|
Performance gain vs Index
|
|
UT Dynamic Asia ex-Japan Portfolio
|
713.4%
|
-15.7%
|
-36.0%
|
+144%
|
|
IT UT Dynamic Asia ex-Japan Portfolio
|
1546.7%
|
-15.2%
|
-25.4%
|
+978%
|
|
MSCI Asia ex-Japan
|
569.0%
|
-16.2%
|
-34.1%
|
-
|