Investors with money in investment trusts in the AIC UK Growth & Income sector have more than doubled their money over the past five years, receiving an average 106 per cent total return.
The research by analysts at Winterflood has revealed the sector, which has £8.5bn in assets under management, has thumped the FTSE All Share index - which only managed a total return of 76 per cent over the period.
However, it was beaten by the FTSE Small Cap index which returned 118.58 per cent, and the FTSE 250 Mid cap index which lead the pack by producing 134.68 per cent returns over five years.
The news comes just as the International Monetary Fund (IMF) has revised its forecast for UK economic growth upwards and dropped its concerns over austerity. The IMF now forecasts GDP growth of 1.9 per cent in the UK for 2014, ahead of all developed markets with the exception of the US - a promising sign for investors in UK funds.
The UK Growth & Income sector has traded at a premium since 2010 following the suspension of BP’s dividend after the Deepwater Horizon disaster in the US. The majority of funds pay a dividend above 3 per cent with five yielding more than 4 per cent.
Finsbury Growth & Income Investment Trust (FGT), a member of the IC Top 100 Funds, has achieved the strongest dividend growth, despite actually cutting its dividend in 2010 following the banking crisis. Those holding the trust are receiving a 2.2 per cent yield.
Investors in the sector are also benefiting from the low management fees associated with these funds. Thirteen have ongoing charges lower than 1 per cent, with City of London Investment Trust (CTY) the lowest at 0.44 per cent, and Temple Bar Investment Trust (TMPL) with a trim 0.51 per cent fee. Winterflood analysts say: “We believe this increases their attraction compared with equivalent open-ended funds, particularly when the greater dividend certainty that the structure provides is considered.”
Adrian Lowcock, senior investment manager at Hargreaves Lansdown says: “The IMF growth forecasts have continuously underestimated the strength of British businesses and the economic recovery. Investors have already benefited from a recovery in the UK’s businesses as the UK stock market has grown significantly from its lows five years ago."
