Trust and fund 2021 performance – Private equity & India boom as Baillie Gifford struggles

Nick Wood, head of fund research at Quilter Cheviot:

“2021 was a year dominated by the reopening of the global economy as a result of the successful vaccine rollout, followed swiftly by the emergence of new variants and reminders that the Covid pandemic is a long way from being resolved. However, in the investment universe this didn’t stop asset prices continuing to rise, with long-term trends continuing to play out. No more was this the case than in the investment trust market, where private equity dominated the performance tables following strong growth in the previous 12 months. This included Baillie Gifford’s Schiehallion, NB Private Equity, BMO Private Equity, Riverstone Energy and Standard Life Private Equity.

“We also saw a number of specialist vehicles, including Vietnam Holding and Ashoka India, both focused on the individual Emerging nations, which managed to withstand the contagion risk spreading from China in the form of the Evergrande defaults and economic and regulatory tightening. We also saw Tufton Oceanic Assets perform well, which invests in shipping vessels.

“Comparing the winners within the trust world versus open-ended, two things jump out. Firstly, the winners in the trust space include a significant number of illiquid assets, highlighting the benefit of the structure, and investments that largely cannot be held comfortably within the open-ended space. It is also noticeable that the winners in the trust space were some ways ahead of those within the open-ended world, at least considering the top 10, highlighting the opportunities out there for investors who are a little more investment structure agnostic, or consider trusts to be beneficial to access some areas of the market. 

“At the other end, like the open-ended world, three trusts investing in China made the list, as did two Biotech focused trusts. However, having had such a successful period, it was notable that three Baillie Gifford trusts made the bottom 10, namely Baillie Gifford China Growth, Edinburgh Worldwide, the global smaller companies trust, and Baillie Gifford Shin Nippon, which invests in Japanese smaller companies. Baillie Gifford will naturally go through some difficult periods as a result of their growth style of investing, but it remains a quality investment house with first rate research capabilities. It would be no surprise to see these trusts bounce back in 2022, although maybe not delivering the same level of performance as their Schiehallion stablemate.”

Source: JP Morgan, Quilter Cheviot, as at 31/12/2021

“Turning attention to the open-ended fund space and the list of top 10 best performers are dominated by US focused funds once again. That includes four US equity focused funds and two technology funds, which naturally have a heavy bias towards the region. This is to be expected given how well the region performed last year and the fact the mega cap tech businesses show no sign of slowing down, despite a quieter year compared to others.

“India was the other theme that performed well, with three of the top ten funds, and very much the place to invest within emerging markets last year. With China still looking a rather uncertain place to invest, India could be a good alternative for investors over the next few years looking to take advantage of a growing middle class and increased infrastructure spending.

“The top spot, however, goes to Guinness Global Energy, no doubt buoyed by the recovery in the oil price since the start of 2021.

“Like in the investment trust space, China dominates when it comes to the laggards, with three of the ten funds. Regulatory issues and state interference have been major themes in the country in 2021 and this has spooked investors somewhat. The outlook for the country remains uncertain, but given the falls seen last year it would be a surprise to see the same name appearing at the bottom of the chart in 2022.

“And finally, highlighting the volatile nature of commodities, while an energy focused fund came out on top, gold endured a very difficult 2021, and two of the top three weakest investing in gold miners. Ultimately these funds are at the mercy of movements in the price of gold, with added volatility of equity markets, so are definitely funds to do your research on before investing.”

Source: Morningstar, Quilter Cheviot