Some of the best performing investment trusts in 2017 have been aided by favourable market conditions as global markets continue to grow.

Top of the pile is Independent Investment Trust (IIT), which delivered a total return of 71.6% which is the share price gain and dividend income. Its portfolio has this year included various high-flying tech stocks, beverage companies and housebuilders, all of whom have generally enjoyed positive share price movements or paid generous dividends.

In second place is Manchester & London Investment Trust (MNL) which has returned 64.9% this year. Its portfolio is filled with the big US tech firms which have enjoyed a solid run in 2017.

Riding the recovery in Europe

Small cap-focused investment trust TR European Growth Trust (TRG) delivered a 53.6% return, helped by more positive conditions in Continental Europe and a paying special dividend.

At full year results in October, fund manager Janus Henderson said the largest contributor to positive performance was research and development drug discovery company Evotec which increased by 290% in value in the financial year ending 30 June 2017.

Also benefiting from stronger European activity is Phoenix Spree Deutschland (PSDL) which has delivered 44% total return this year and is exposed largely to German residential property.

It focuses on the high growth Berlin market having exited other areas to focus on the country’s capital. It benefits from the peculiarities of the German property market where there is less interest in owning houses compared to the UK with a greater focus on renting.

Benefiting from Asian exposure

Two trusts focused on emerging markets, being Baillie Gifford-run Pacific Horizon Investment Trust (PHI) and JPMorgan Chinese Investment Trust (JMC), achieved similar returns this year with just below 50% total return.

Pacific Horizon has benefited from a strong performance in technology stocks in the Asia ex-Japan region held in abundance.

These stocks have rallied this year and the trust’s manager Ewan Markson-Brown believes the rising wealth of the middle class in Asia is going to be a big driver of global growth over the next 20 years. He thinks that the markets do not appreciate this yet.

Pacific Horizon has also benefited from exposure to India, a growing economic powerhouse that some predict to be the ‘new China’ in terms of global significance. Markson-Brown is described as a ‘big picture’ person, looking at the macro themes impacting the markets he’s invested in.

JPMorgan Chinese Investment Trust has four separate fund managers running its portfolio. The managers say in a statement that the fund’s outperformance has been driven primarily by individual stock selection rather than sector allocation which ‘had little impact on returns’.

Certain stocks such as Ping An Insurance have contributed most to the performance due to rising rates and solid financial results.

Another Baillie Gifford-run trust among this year’s top performers is Baillie Gifford Shin Nippon (BGS). Fund manager Praveen Kumar looks for small Japanese companies with good growth prospects and takes a three to five year view on them.

Macau Property Opportunities (MPO) bounced back with a 51.1% year to date return thanks to strong economic growth and increasing visitor numbers in Macau.

Three years ago, Macau was rocked by China’s anti-corruption campaign, which hit the gambling industry and the economy. In the first half of 2017, Macau’s economy grew by 10.9%, driven by a strong rebound in gaming revenue and tourist visitors, according to the Macau Property Opportunities’ manager Sniper Capital.

Tapping into life sciences

Syncona (SYNC) generated 51.9% total return for investors as it deployed a strategy to commercialise life science technology and treatments for patients.

Elsewhere, a recovery in the mining sector helped Baker Steel Resources Trust (BSRT) to generate just over 50% total return. It seeks long term capital growth by focusing on shares in natural resources firms to exploit value in market inefficiencies and pricing anomalies. (DS/LMJ)

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