Cover of MoneyWeek magazine issue no 585

The water dilemma

20 April 2012 / Issue 585

Profit from our most precious resource

PLUS:

  • A risky play on the shale gas boom
  • From golf caddie to top hedge fund manager
  • A go-it-alone Scotland must ditch the pound

Excerpt

The best investment trusts

I wrote a piece last week about my own investments. Along the way I mentioned that I mostly invest in investment trusts. I do so because they are generally cheaper than unit trusts and they also tend, over time, to perform better.

For those in any doubt of this, The Sunday Times had a neat little comparison of investment trusts and unit trusts run by the same managers this week.

Take Invesco’s Neil Woodford. He runs the Invesco Perpetual High Income Fund and the Edinburgh Investment Trust. Over the last three years, his unit trust has returned 58% on an annual management fee of 1.5%. His investment trust has returned 100% on 0.7%.

Harry Nimmo has a similar record. He runs a unit trust and an investment trust. They are both called Standard Life UK Smaller Companies, but the unit trust has returned 111% on a fee of 1.6% while the investment trust has returned 152% on a 0.8% fee.

Overall, the 16 equity-focused investment trusts have beaten their unit-trust equivalents by around 4% a year for the last ten years. Given this (and assuming that extrapolating it is not completely insane), it clearly makes sense to pay more attention to investment trusts than most people do.

• Read the full editor’s letter here: The best investment trusts.