New research shows an interesting performance trend when a manager runs different products with similar strategies, writes Laura Suter
Thursday 18 Jul 2019 Author: Laura Suter

Fund managers who run both an investment trust and a fund to a similar strategy will usually outperform on the trust.

A number of fund managers run both an investment trust and a fund, with many having the same strategy and a big overlap between their holdings. But how can investors work out which to buy? Research from AJ Bell shows that the investment trust is far more likely to outperform than the fund.

The research looked at 49 ‘dual managers’ who run a similar trust and fund, and compared fees, performance over 10 years and volatility.

In 75% of cases the investment trust outperformed the fund, on a total return basis over a 10-year period. What’s more, in 60% of the pairings the trust was the cheaper vehicle, with a lower ongoing charges figure (OCF). On average the funds in the group cost 0.97% while the trusts cost 0.91%.

However, investors shouldn’t just jump for the trust. They don’t get this extra performance for free and they have to be prepared for a bumpier ride. This is because investment trusts have the ability to borrow money, or ‘gear’, where funds do not. It means that when a trust is doing well its returns can be supersized, which helps to account for some of the outperformance.

On the flipside, it means that when their investments are falling in value these losses could be amplified. This shows in the figures, and a whopping 90% of the time the trust is more volatile than the equivalent fund.


One of the more famous dual managers is Nick Train, who runs both the £7.1bn Lindsell Train UK Equity Fund (B18B9X7) and the £1.8bn Finsbury Growth & Income Trust (FGT). The fees on the funds are almost identical, as are the top 10 holdings and the investment strategy. Despite this the trust’s performance has outstripped the fund, returning 498.6% over 10 years compared to 432.8% for the fund.

However, over time the trust has been slightly more volatile, likely due to the gearing that the trust has, which is currently low at 1.2%. It means that if investors know they can stand the slightly bumpier ride, historically they would have been better off invested in the trust.

Alexander Darwall runs Jupiter European Fund (B5STJW8) and Jupiter European Opportunities Trust (JEO). This is an example where the trust is cheaper than the fund, with an OCF of 0.9% compared to 1.02% for the fund. Over 10 years the performance difference is stark, with Jupiter European returning 364% compared to 567.9% for the trust, with the lower fees also likely playing a part. However, there is quite a dramatic difference in volatility between the two, with the trust being a third more volatile.

One pairing that bucks the trend of trusts being  cheaper is Alex Wright’s Fidelity Special Situations (B88V3X4) and Fidelity Special Values (FSV) investment trust, where the latter is pricier than the fund, costing 1.05% compared to 0.91%.

Despite this potential fee drag, the trust has outperformed the fund by almost 50% more over 10 years, returning 268.5% compared to 187.8%, although Wright hasn’t run the fund for that entire time.

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