Investment trusts as a whole delivered strongly in 2014, with venture capital trusts (VCTs), emerging market vehicles and those focused on the biotechnology industry delivering some of the best results.
VCTs dominated the performance table last year, with six out of the top-10 performing trusts in the Association of Investment Companies (AIC) universe falling into this category.
Interestingly, three of the top-10 performing non-VCT vehicles are focused on India and one on Vietnam, while three invest in biotechnology and healthcare – which demonstrates some of the key investment themes in 2014.
The best-performing investment trust excluding VCTs for the year was Ocean Dial Asset Management’s India Capital Growth, which delivered a total return of 70.07 per cent, according to data from FE Analytics. In fact, the top-three trusts in 2014 had an India focus, with these three companies delivering an average return between them of 58.2 per cent.
Strong performance also came from biotechnology trusts, with the SV Life Sciences International Biotechnology Trust returning 48.16 per cent for the 12 months, while Frostrow Capital’s Biotech Growth Trust delivered an equally impressive 44.87 per cent.
Geoff Hsu, Biotech Growth manager, explains: “The biotech sector’s strong performance in 2014 was driven primarily by robust earnings growth among the leading companies from the launch of new products, continued mergers and acquisitions activity, and several positive clinical data results reflecting innovation across a variety of therapeutic areas.”
Given the strong performance of these individual trusts, it is perhaps not surprising that the top-performing AIC sector in 2014 was the IT Biotechnology and Healthcare sector, which delivered 39.34 per cent. The IT Country Specialists Asia Pacific sector ended the year in second place with a return of 35.8 per cent.
India has been a surprising source of returns in 2014, with the election of Narendra Modi in the first half of the year boosting sentiment among investors after a period in which the country had struggled, having been left behind by neighbour China.
But with prime minister Modi delivering reforms to the market, India has started to deliver on its potential, with the MSCI India index returning 31.58 per cent in 2014 compared with just 6.23 per cent from the wider MSCI AC Asia Pacific index and a slightly better 14.68 per cent from the MSCI China index.
David Cornell, chief investment officer at Ocean Dial, notes: “The current changes taking place [in India] show this is a country that can no longer be ignored by investors. Thanks to sound monetary policy from the globally respected Reserve Bank of India governor Raghuram Rajan, India is much better placed to weather a tighter global monetary environment.
“Furthermore, for the first time in the country’s history, there is both the electoral mandate and strong leadership under the helm of Mr Modi to create a cleaner political system that delivers long-term economic growth.”
Meanwhile, alternative investments have also been a strong driver of returns within the investment trust sectors, with property and infrastructure both featuring in the top-10 best performing sectors, according to data from FE Analytics.
