The £800 million Abrdn UK Smaller Companies Growth Trust plc and Baillie Gifford’s £1 billion Scottish American Investment Company plc were among the best performing investment trusts of the 36 rated by Morningstar in 2021.
Morningstar said Abrdn UK Smaller Companies Growth Trust returned 30.17% in 2021 to place third in its league table and Baillie Gifford’s Scottish American returned 20.45% in 2021 to place eighth.
Montanaro European Smaller Companies Trust took Morningside’s first place in 2021 with a gain of over 33% on a net asset value (NAV) basis, with Fidelity Special Values in second place in 2021 with a return of 32.5%.
Morningstar said the Edinburgh-based Mid Wynd International Investment Trust returned 19.84% to place 10th, while Aberdeen Standard Equity returned 18.38% to come 13th.
Morningstar said that, not surprisingly, Baillie Gifford’s flagship £23 billion Scottish Mortgage Investment Trust could not match its “astonishing performance” of 202o when it returned 107%, but nonetheless it returned a “still respectable” 12.5% in 2021 to place 21st.
Over 10 years Scottish Mortgage’s net asset value per share has increased by 1,072% versus a 275% increase in the FTSE All-World. Over five years it has increased by 341% against 83%.
The Morningstar ratings came as the Association of Investment Companies (AIC), the trade body for the investment trust sector, reported record levels of fundraising in the industry with as many mergers in 2021 as in the previous five years combined.
The AIC said the fundraising helped propel the industry to its highest ever level of assets under management at just under £278 billion.
£15.1 billion of new money was raised in 2021, including £3.8 billion in 16 IPOs. The previous record was set in 2014 when £10.2 billion was raised.
The £11.3 billion raised by existing investment companies in secondary fundraising was also a record, well above the previous high of £7.4 billion in 2019.
“Fundraising was led by investment companies in the Renewable Energy Infrastructure sector which raised £3.4 billion between them, including £874 million in six IPOs,” said the AIC, which now represents investment trusts, venture capital trusts and other closed-end funds.
“This was followed by the Infrastructure and Growth Capital sectors, which raised totals of £2.1 billion and £2.0 billion respectively.
“Industry assets stood at £277.6 billion at the end of November, an all-time high.
“2021 was a year of investment company mergers with five deals completed, the same as the number of mergers in the previous five years (between 2016 and 2020 inclusive), and the most mergers in a year since AIC records begin.
“A sixth merger has been approved by shareholders of Scottish Investment Trust with JPMorgan Global Growth and Income.
“Five changes of management group also became effective during the year, with two more announced.
“Boards were active in negotiating fee reductions on shareholders’ behalf. A total of 31 investment companies made fee changes to benefit shareholders.
“The average investment company generated a share price total return of 15.7% over the 2021 calendar year.
“The Property – UK Logistics sector performed best over this period with a 51.6% return.”
AIC CEO Richard Stone said: “It has been an enormously busy year for investment companies, most notably on the fundraising front, with a record £15 billion raised, but also for mergers, management group changes and fee reductions.
“While strong fundraising is a vote of confidence in the investment company structure, especially for investing in less liquid assets such as green infrastructure and growth capital, fee reductions and manager changes are welcome signs of boards exerting their independence to make sure shareholders are getting the best deal.
“The record number of mergers this year suggests that investment company boards are also responding to investor demand for larger, more liquid investment companies that can deliver the benefit of economies of scale to shareholders.”