AIC: HgCapital and Allianz Tech net long-term ISA investors a £2m pot

Thirty two investment trusts would have made a retail investor over £1m if they had invested the full annual £20,000 ISA allowance into the same trust each year from 1999 to 2023, according to the Association of Investment Companies (AIC).

£1.9bn private equity trust HgCapital has returned 3700% over the 25-year period and would have generated a tax-free pot of over £2m by 31 January 2024.

The private equity sector was the highest-performing AIC sector of 2023, returning 43% to the end of November against the average trust’s return of 3%. Investment trusts have often been credited as a vehicle for allowing retail investor access to private equity.

Jim Strang, chair of HgCapital Trust, said: “It is very heartening that the company has been able to deliver such compelling gains for shareholders over the last 25 years. This is a solid endorsement of the private equity model and the skill and expertise that the manager, Hg, has employed so successfully over this time.

“HgT provides shareholders with unique listed access to the investment portfolio of Hg. The performance that HgT has delivered has come from the continual refinement and focus on a clear investment model implemented by Hg, targeting software and services leaders that transform how people work.

“These companies typically benefit from strong recurring revenue streams and high margins, and operate in fragmented markets, allowing growth to be accelerated further via M&A.”

See also: Pacific Horizon’s Durrant: Why the US and Europe are the new emerging markets

Investing the full ISA allowance annually over the period, a total of £306,560, into the £1.3bn Allianz Technology would have also have left investors with a £2m figure, while the £3.5bn Polar Capital Technology also made the top three trusts for long term returns.

Asia small-caps also performed well over the period, with Scottish Oriental Smaller Companies and Abrdn Asia Focus also featured among the top 10 for long-term returns.

Annabel Brodie-Smith, communications director of the AIC, said: “It’s been a challenging time for investors recently, with high inflation coupled with geopolitical tensions and an uncertain outlook.

“In difficult times, it’s important for investors to take a long-term approach to their investments. Investment trusts have been in existence for more than 155 years, surviving two World Wars, the Great Depression, the 1970s era of high inflation, the tech boom (and bust), the financial crisis and the pandemic.

“They have a fixed pool of capital which means investment trust managers can take a long-term view of their portfolio, holding on to assets during market downturns, rather than being forced to sell them at cheap prices.”

See also: Lindsell Train, Invesco and Schroders managers join 2024 FE Alpha Manager list