30 “ISA millionaire” investment companies show the power of long-term investing

Tech focused companies lead the pack despite recent travails - HgCapital top performer with a return of £2,062,931.

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A total of 30 investment companies would have made investors more than £1 million if they had invested the full annual ISA allowance in the same company each year, according to new data from the Association of Investment Companies (AIC).

Investing the full ISA allowance annually from 1999 to 2021, a total of £266,560, and reinvesting the dividends into one of the five investment companies below would have generated a tax-free pot of over £1,500,000 by 25 February 2022.

  • HgCapital
  • Scottish Mortgage
  • Allianz Technology
  • Pacific Horizon
  • Polar Capital Technology

There is a clear tilt towards technology in these top-performing companies. HgCapital, which invests “primarily in software and services businesses”, returned £2,062,931, while Scottish Mortgage, which has a strong focus on technology companies, returned £2,046,762. Allianz Technology and Polar Capital Technology both sit in the AIC Technology & Media sector, and returned £1,746,012 and £1,555,681 respectively, while Asia-focused Pacific Horizon returned £1,726,154.

Three of the top five performers – HgCapital, Scottish Mortgage and Pacific Horizon – invest at least part of their portfolio in unquoted companies.

Investment companies that invest in smaller companies also feature heavily in the “ISA millionaire” list. The best-performing of these is Aberdeen Standard Asia Focus from the Asia Pacific Smaller Companies sector, which has returned £1,399,197 and is sixth-placed in the table. In total, 14 of the 30 ISA millionaire investment companies are invested in smaller companies.

The returns are taken to last Friday, 25 February 2022, so incorporate the significant market falls investors suffered last month.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “It has been a troubling time for markets, with the news dominated by terrible reports from Ukraine. While the human tragedy clearly takes precedence, investors have also been concerned about the large market falls we have seen since the start of the hostilities and the imposition of heavy sanctions on Russia.

“In this context, it can be reassuring to look at investments with a long history of surviving crises and market crashes. Investment companies have more than 150 years of history, and our recent research shows that 30 of them would have returned more than £1 million for ISA savers who invested their entire allowance each year.

“The closed-ended structure of investment companies, with a fixed portfolio of assets, makes them particularly suitable for long-term investing. This is because they can hold on to investments through market crashes, at a time when open-ended funds are often forced to sell in order to meet investors’ demand for cash. Investment companies can also more readily invest in smaller companies and companies not quoted on public markets, which feature strongly in our list of top performers over this period.

“However, it’s always important to spread your risk, as no-one knows which will be the best-performing investment companies in the future. Having a diversified portfolio which suits your long-term needs is key, and investors who need guidance should speak to a financial adviser.”

Comments from the top three performers

Matthew Brockman, Managing Partner of HgCapital, said: “For each of the years since ISAs were launched, we at Hg have executed and refined our investment strategy, focusing on investing equity in private businesses that supply software and tech-enabled services to other businesses. We focus on what we know: growing private companies that supply the workflow software, data and business services that every business needs. We have assembled a portfolio of companies benefiting from the long-term tailwinds of increasing computing power and automation but which are also mission critical to the user, leading to great resilience. This provides our investors with exceptional long-term growth, well over 20% annually, while avoiding the parts of the tech sector associated with rapid innovation or serving the consumer. As a result, our portfolio has grown every single year over the last 20 years leading to consistent, annually compounding, returns.”

Claire Shaw, Investment Specialist at Scottish Mortgage, said: “Scottish Mortgage aims to identify, own and support the world’s most exceptional growth companies whether public or private; companies that offer the potential of genuinely transformative returns. Our core task is to find those companies that have the opportunity to deliver outsized returns and own them for long enough without interferences, so that the return accrues to our shareholders. We believe our first duty to shareholders is to provide value for money and it is pleasing that the continued growth in Scottish Mortgage’s assets has meant that costs as a proportion of net asset value have reduced as the trust shares the benefits of scale with its owners. While we are delighted with the returns we have generated for our shareholders since 1999, our attention remains focussed on maximising returns over the next ten years and beyond and we are both optimistic and enthused for the opportunities that lie ahead.”

Walter Price, Portfolio Manager of Allianz Technology, said: “Our view is that the technology sector is entering a golden age as demand for technology products is robust and revenue growth remains strong. We live in a world where things are constantly changing and companies need to adapt, accelerating growth in technology solutions, including cloud, software-as-a-service, artificial intelligence and cyber security. For example, a current long-term trend having an impact is labour shortages, and technology providers can offer solutions to industries struggling to employ labour. We expect that the companies that can deliver consistent earnings growth should see attractive stock performance in the near term, though valuations will face their share of headwinds, particularly now that inflation is rising.

“We aim to find the winners in the sub-sectors of technology and the portfolio is made up of high growth companies, companies that can provide growth at a reasonable price (GARP) and companies which are on the value end of the technology investment spectrum, out-of-favour in the market. Our strategy is to continue to provide this diversified portfolio, adjusting according to the prevailing environment. Despite recent declines in the technology sector, we believe the long-term drivers remain fully intact and that the market rotation is not an indication of fundamental issues with technology companies.”

The 30 “ISA millionaire” investment companies

Investment company

AIC sector

% share price total return, 06/04/1999 to 25/02/2022

Total ISA investment  value at 25/02/2022

HgCapital Trust

Private Equity

3,450

£2,062,931

Scottish Mortgage

Global

1,776

£2,046,762

Allianz Technology Trust

Technology & Media

1,603

£1,746,012

Pacific Horizon

Asia Pacific

3,210

£1,726,154

Polar Capital Technology

Technology & Media

1,298

£1,555,681

Aberdeen Standard Asia Focus

Asia Pacific Smaller Companies

3,606

£1,399,197

BlackRock Throgmorton Trust

UK Smaller Companies

1,504

£1,394,984

BlackRock Smaller Companies

UK Smaller Companies

1,353

£1,313,361

Montanaro European Smaller Companies

European Smaller Companies

1,109

£1,225,549

Scottish Oriental Smaller Companies

Asia Pacific Smaller Companies

3,222

£1,201,039

TR Property

Property Securities

2,015

£1,197,023

3i

Private Equity

930

£1,194,494

Rights & Issues

UK Smaller Companies

1,730

£1,187,666

Canadian General Investments

North America

1,531

£1,187,340

abrdn UK Smaller Companies Growth

UK Smaller Companies

724

£1,165,308

BlackRock World Mining Trust

Commodities & Natural Resources

2,154

£1,158,910

Biotech Growth

Biotechnology & Healthcare

1,315

£1,124,071

Worldwide Healthcare

Biotechnology & Healthcare

1,932

£1,120,001

JPMorgan UK Smaller Companies

UK Smaller Companies

1,294

£1,102,772

Invesco Perpetual UK Smaller Companies

UK Smaller Companies

1,340

£1,099,079

Oryx International Growth

UK Smaller Companies

842

£1,092,604

Mid Wynd International

Global

1,155

£1,078,848

JPMorgan China Growth & Income

China / Greater China

1,497

£1,074,332

JPMorgan European Discovery

European Smaller Companies

1,692

£1,063,440

JPMorgan American

North America

666

£1,056,986

International Biotechnology

Biotechnology & Healthcare

1,658

£1,039,390

JPMorgan US Smaller Companies

North American Smaller Companies

1,207

£1,021,282

Henderson Smaller Companies

UK Smaller Companies

475

£1,016,271

Schroder AsiaPacific

Asia Pacific

1,349

£1,007,009

The European Smaller Companies Trust

European Smaller Companies

841

£1,001,620

Source: AIC/Morningstar. % share price total return is for a single lump sum invested at the beginning of the period. Total ISA investment value is the total value of an investment on 25/02/2022 if the maximum ISA limit for each year had been invested annually from 1999 to 2021, with the investment being made on 6 April each year.

-ENDS-

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Notes to editors

  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 360 members and the industry has total assets of approximately £269 billion.
  2. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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