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AIC aims to make choosing trusts easier

The AIC has created a new investment trust sector to make it easier to compare trusts.
December 30, 2015

The Association of Investment Companies (AIC) has created a new investment company sector, Flexible Investment, and the new category will include a number of IC Top 100 Funds.

AIC Flexible Investment sector

TrustFormer AIC SectorDiscount/premium to NAV (%)1 year share price return (%)3-year cumulative share price return (%)5-year cumulative share price return (%)10-year cumulative share price return (%)
*BACIT OrdGlobal+5.48.225.5nana
Henderson Alternative Strategies TrustGlobal-17.9-10.6-6.8-16.3-25.0
Invesco Perp Select Balanced OrdGlobal+1.8-0.614.012.6na
Miton Worldwide Growth OrdGlobal-8.60.621.824.423.0
New Star Investment Trust OrdGlobal-341.810.3-6.4-38.8
*Personal Assets OrdGlobal-0.90.34.020.868.1
*RIT Capital Partners OrdGlobal+3.815.053.047.6102.9
*Ruffer Investment Company OrdGlobal+1.51.712.916.7108.3
BlackRock Income Strategies OrdGlobal Equity Income+0.715.530.226.871.5
*Capital Gearing OrdUK All Companies+0.720.8-2.711.164.2
Average2.316.215.346.8
FTSE All Share TR GBP-0.220.432.871.2
MSCI World All Cap NR USD3.642.052.9

Source: Morningstar

Performance as at 10 December 2015

*IC Top 100 Fund

 

This new sector will comprise 10 investment trusts, most of which were formerly classified in the Global sector. The definition of the new sector is: "Companies whose policy allows them to invest in a range of asset types." Ian Sayers, chief executive of the AIC, says: "We believe the new sector will help investors and advisers to easily find and compare those investment companies that have the ability to invest in a range of assets."

A difficulty for investors has been comparing funds in the global sector with each other because they are very different, with some trusts invested purely in equities and others in a range of different asset classes. And some global trusts are more volatile growth-focused funds while others try to preserve wealth.

"It makes sense to reclassify a number of investment companies from the AIC's Global sector, which had become unwieldy with 35 funds covering a broad range of mandates," say analysts at Numis. "It is useful to group funds with more flexible mandates together."

However, Jason Hollands, managing director at Tilney Bestinvest, argues that: "There's a case for further segmenting the global sector, between those trusts that pursue a true global approach, eg Foreign & Colonial (FRCL) and Henderson Global (HGL), and those, such as Bankers (BNKR), Brunner (BUT) and Caledonia (CLDN), which have a structural bias towards the UK market."

Simon Elliott, head of the investment trust research team at Winterflood, also says that there is still a good deal of difference between the remaining trusts in the global sector. For example, Scottish Mortgage Investment Trust (SMT), although growth-focused, is not a pure equity fund as it has around 10 per cent of its assets in unquoted companies.

David Liddell, chief executive of online investment adviser IpsoFacto Investor, adds that the trusts in the new Flexible Investment sector are still quite different from each other. "Look at each individual trust and its record, and what assets it invests in," he says. "The bottom line is that they are relying on the fund manager to call things right - it is not just about good stockpicking, but asset allocation."

It could be better to measure them against appropriate indices rather than against each other, as the different strategies result in variable performance results. With more defensive trusts look at their absolute returns on a calendar-year basis, rather than their cumulative returns against growth-orientated benchmarks. You should be able to find details of each trust's underlying strategy in its annual report. And keep monitoring the trust's asset allocation as this will change over time.

Mr Sayers says the introduction of the Flexible Investment sector will also allow investors to compare investment companies with similar open-ended funds, as the name of the new sector mirrors the name used by the Investment Association for an open-ended fund sector that contains more than 130 funds. These are also very different from each other, which can result in variable performance.