“ISA Millionaire” – AIC Article


– Tech focused companies lead the pack despite recent travails

– HgCapital top performer with a return of £2,062,931

– Full table included below

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 2021.

  • 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 2021, 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 companyAIC sector% share price total return, 06/04/1999 to 25/02/2022Total ISA investment  value at 25/02/2022
HgCapital TrustPrivate Equity3,450£2,062,931
Scottish MortgageGlobal1,776£2,046,762
Allianz Technology TrustTechnology & Media1,603£1,746,012
Pacific HorizonAsia Pacific3,210£1,726,154
Polar Capital TechnologyTechnology & Media1,298£1,555,681
Aberdeen Standard Asia FocusAsia Pacific Smaller Companies3,606£1,399,197
BlackRock Throgmorton TrustUK Smaller Companies1,504£1,394,984
BlackRock Smaller CompaniesUK Smaller Companies1,353£1,313,361
Montanaro European Smaller CompaniesEuropean Smaller Companies1,109£1,225,549
Scottish Oriental Smaller CompaniesAsia Pacific Smaller Companies3,222£1,201,039
TR PropertyProperty Securities2,015£1,197,023
3iPrivate Equity930£1,194,494
Rights & IssuesUK Smaller Companies1,730£1,187,666
Canadian General InvestmentsNorth America1,531£1,187,340
abrdn UK Smaller Companies GrowthUK Smaller Companies724£1,165,308
BlackRock World Mining TrustCommodities & Natural Resources2,154£1,158,910
Biotech GrowthBiotechnology & Healthcare1,315£1,124,071
Worldwide HealthcareBiotechnology & Healthcare1,932£1,120,001
JPMorgan UK Smaller CompaniesUK Smaller Companies1,294£1,102,772
Invesco Perpetual UK Smaller CompaniesUK Smaller Companies1,340£1,099,079
Oryx International GrowthUK Smaller Companies842£1,092,604
Mid Wynd InternationalGlobal1,155£1,078,848
JPMorgan China Growth & IncomeChina / Greater China1,497£1,074,332
JPMorgan European DiscoveryEuropean Smaller Companies1,692£1,063,440
JPMorgan AmericanNorth America666£1,056,986
International BiotechnologyBiotechnology & Healthcare1,658£1,039,390
JPMorgan US Smaller CompaniesNorth American Smaller Companies1,207£1,021,282
Henderson Smaller CompaniesUK Smaller Companies475£1,016,271
Schroder AsiaPacificAsia Pacific1,349£1,007,009
The European Smaller Companies TrustEuropean Smaller Companies841£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.

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  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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