Investments: Look east for top earning trusts

More than half of the top 20 trusts in the five years ending on 31 December invest in emerging markets, with Asia a particularly strong focus, according to figures compiled by Gillespie Macandrew.

It listed the top 20 and bottom 20 trusts registered in Scotland, based on performance over the five years ending 31 December 2010.

The top dog, the Scottish Oriental Smaller Companies run by First State, invests in Asian companies worth no more than 1 billion. Anyone who invested 1,000 in the trust in January 2006 would have had 2,965 to show for it by the end of last year, growth of 197 per cent.

The smaller companies theme is prominent in the top table, with the second-placed Standard Life UK Smaller Companies Trust generating a 171 per cent return over five years.

Harry Nimmo's 136 million trust, which launched in 1994, was up 71 per cent in 2010 alone, making it the strongest performer over the last 12 months.

This compares with a 21.8 per cent total return in the FTSE Investment Companies Index in 2010, which itself outstripped the FTSE All Share by more than 7 per cent.

Aberdeen Asset Management boasts seven of the top 10, with the Asian Smaller Companies Trust, up 146 per cent over five years, leading the way. The firm's expertise in Asia, where it is led by veteran Hugh Young, has borne fruit for investors.

Most of its top ten trusts are Asia-focused, the exception being Edinburgh-based Bruce Stout's Murray International Trust, which has a more global remit.

John Newlands, head of investment trust research at Brewin Dolphin in Edinburgh, said: "Aberdeen made a bold decision to set up in Singapore well ahead of the pack. It ran money locally before a lot of other people and turned into an extraordinarily successful operation."

Even the more generalist trusts have an increasingly heavy exposure to emerging markets.The Scottish Investment Trust, which was up 34 per cent last year, has large holdings in firms including Baidu (China's internet search engine) and Brazil's Petrobas.

Scott Ballantyne, investment manager at Gillespie Macandrew, said: "It is evident from the top performing trusts that those with exposure to emerging economies have benefited from the faster economic growth rates being experienced and this reinforces the shift in money supply from the west, which is a theme we incorporate in our portfolio construction and management."

But the impact of low interest rates on private savings means income and growth trusts have been the favoured choice of private investors over the past year.

Newlands said: "The sector used to be pre-dominantly UK but we're now seeing more global income and growth trusts and we expect more to be launched in the coming months," he said.

Investors in all but three of the trusts in the bottom half of the table have seen their capital reduced over the five years covered by our survey. Those who put 1,000 five years ago into the worst Scottish performer - the Aberdeen Development Capital Trust Plc Ord 10p - would have seen that dwindle to just 91 by the end of last month.

The trust, like several in the bottom 20, is private equity focused.

Ballantyne said: "In the lower half of the table we see quite a number of private equity and property trusts, which suffered throughout the financial crisis and have yet to recover lost ground. Both sectors will find the economic environment difficult for growth until such time as banks relax current lending practises. In our opinion this will not happen for some while."

But Newlands said private equity trusts were undeservedly overlooked by investors.

"People had their fingers burnt in the technology boom and bust but, as a result, private equity trusts are now at the opposite end of the prudence spectrum and are valuing everything very carefully," said Newlands.

Japan - excluded from the emerging markets and Asia trusts that feature strongly in the top 20 - financial and European trusts are also prominent in the bottom 20.