A recovering private equity sector was the top-performing among investment trusts this year, as strong performance across sectors last month showed signs of an early ‘Santa rally’, the Association of Investment Companies (AIC) said on Wednesday.
The asset class produced a return of 43% for trusts over the 11 months to the end of November 2023, whereas the average investment company in the UK returned less than 5% over the same period, and the average trust agnostic of sector and region generated a 3% return.
Within those trusts that invest in private equity, the AIC identified 3i Group PLC (LSE:III) as delivering the best returns for investors, with a 71% share price total return for the year to date, bucking a trend of deepening discounts among many otherwise strong-performing trusts.
The technology and related innovation sector achieved the second-highest returns among trusts of 37% on average, while North America-focused trusts came third with an average return of nearly 14%, the AIC said.
The fourth best-performing area for investment was Europe, with trusts specialising in European investments returning 12% of investor capital this year, while the average returns of listed funds investing in India and the Indian Subcontinent came fifth at 10%.
Annabel Brodie-Smith, Communications Director at the AIC, said: “It’s been a challenging year for investment companies, with high inflation and rising interest rates, unhelpful cost disclosure regulation and war breaking out in the Middle East and continuing in Ukraine.
“However, many investment companies have performed well over the first 11 months of the year and this accelerated in November with better-than-expected inflation figures bringing an early Santa rally.
“Private Equity, the best-performing sector, has come back strongly this year, with 3i the top-performing investment trust of the year.”
The AIC said that many other trusts investing in the private equity sector “are performing well this year but are currently trading on wide double-digit discounts”.
Brodie-Smith said the rise of artificial intelligence has led to a bounce-back in the tech sector, driving up the ‘Magnificent Seven’ tech stocks in the US.
“This year’s top-performing sectors reflect the market and economic conditions in 2023,” she added.
“It’s important to remember that investment is about the long term. Rather than focusing on today’s winners, it’s important to build a balanced portfolio of investments which suits your needs.”