Smaller companies investment trusts dominate most consistent performers

The most consistently strongly-performing investment company of the past decade to 31 March 2014 is IC Top 100 Fund Standard Life UK Smaller Companies (SLS), which has been managed by Harry Nimmo for the last 10.5 years. As well as annual, consistent returns a £100 investment into this company over 10 years would have grown to £645.

"Following the improvement in the domestic economy and strong performance of the asset class, smaller company valuations have risen in recent months," said Harry Nimmo, manager of Standard Life UK Smaller Companies. "We expect the strengthening economic environment to boost market earnings and therefore support valuations in general.

"However, this strong year-to-date performance means a more selective approach is warranted and we prefer to focus on underappreciated businesses in control of their own destinies. In particular, those demonstrating durable earnings trends and strong cash flow generation whatever the market environment should prove more resilient and outperform in the long term."

When calculating which trusts were most consistent the AIC looked at discrete annual returns. Each year performance was benchmarked against the overall average performance of the investment company sector. Those who most consistently outperformed on an annual basis were identified. Where two companies had the same consistency score, volatility of returns (standard deviation) was used to differentiate between them.

The second most consistently strong performing investment company of the decade is Dunedin Smaller Companies (DNDL) managed by Ed Beal for the past eight years.

IC Top 100 Fund Lindsell Train (LTI) is in third place, and this Global sector trust has been managed by Nick Train for 13 years.

In fourth position is Keystone Investment Trust (KIT) which is in the UK All Companies sector and which has been managed by Mark Barnett for the past 11 years.

Read more on the Invesco Perpetual managed investment trusts

The fifth most consistently strong performing investment company of the last decade is another IC Top 100 Fund, Law Debenture Corporation (LWDB), in the Global sector. It has been managed by James Henderson for the last 11 years who has also managed IC Top 100 Fund Lowland (LWI) for 24 years, another top 20 consistent performer.

"Performance is only one of a number of factors to bear in mind when considering investment companies," said Annabel Brodie-Smith, communications director at the AIC. "Investors need to look at other criteria including: gearing, charges, valuations and portfolio composition. Whilst it's always interesting to see who the latest shoot the lights out performers are, it is long-term consistent returns that are key."

The AIC's research also highlights the importance of fund manager longevity with 12 out of 20 of the most consistently performing trusts being managed by the same manager for a decade or more. Fifteen out of 20 have been managed by same manager for at least eight years.

The AIC points out that when looking at fund's past performance it's important to consider consistency, as often the best performers one year are not the top performers of the future. But while last year a quarter of the most consistently strong performers came from the Asia Pacific excluding Japan sector, this year it is only three, demonstrating that even short-term periods of market turbulence can impact consistency.

Top performing, most consistent investment companies of the last decade

Source: AIC using Morningstar