Keeping track of a winner

INVESTMENT TRUSTS

With a record going back over 100 years, investment trusts have demonstrated their ability to perform over the long term. But unlike unit trusts, there are several ways to measure their performance, writes Tony Lyons.

Most investment trust managers like to look at the growth in net asset value per share. This is the value of their total basket of investments divided by the fixed number of shares in issue, after allowing for "gearing" - any money borrowed by the fund for investment. The managers usually compare this net asset value against a benchmark stock market index, which for UK-oriented trusts might be the FT-SE 100 or the FT-SE All-share.

Today, investment trusts are grouped into some 19 different sectors. These range from "general", "international", "capital growth" and "income growth" to a variety of different specialisations in specific markets or sectors, including property, smaller companies and venture capital funds which invest in private companies.

Investment trusts are traded on the stock market, so the easiest way to compare their performance is to look at their share prices, as in the tables below. These show the best and worst performers over the past one, three and five years, including reinvested income net of tax (but excluding split-capital trusts).

It is notable that both the best and worst performers tend to be the higher-risk specialist funds. More general funds are usually found among the middle rankers. Even so, with their lower charges, they have tended to do slightly better than the average unit trust over the longer term.

Looking at international equity growth funds, for example, pounds 1,000 invested in the average unit trust of this type would have returned pounds 1,372 over three years and pounds 2,079 over five years.

If the same amount had been put into the average investment trust in this sector it would have returned pounds 1,318 and pounds 2,083 over the same periods.