/Investment company performance

Investment company performance

The political uncertainty that was a consistent feature of 2016 has continued this year with countries across Europe and Japan going to the polls; Brexit negotiations, which led to the recent announcement of a Brexit deal; worries over rising inflation and the first interest rate hike in ten years.

Over 2017 to the end November, overseas smaller companies sectors are leading the way with Japanese Smaller Companies the top performing sector, returning an impressive 47% and in second place is European Smaller Companies, up 44%. The Japan sector takes third place, up 34%, Country Specialists: Asia Pacific follows closely in fourth place, up 33% and UK Smaller Companies completes the top five, returning 27%.

Top performing investment company sectors over year-to-date – % share price total return to 30 November 2017. Source: Morningstar.

It has been a good year for the close-ended sector in share price total return terms, with the average investment company (ex VCTs) up 14%. This is two percentage points on the sectors average performance (12%) to the end of November 2016.


There has been a lot of demand for VCT shares so far in the 2017-18 tax year and in November the Treasury’s Patient Capital Review announced changes to the VCT investment rules. VCT performance over the year has been strong, up an average of 7% to the end of November 2017. This is up four percentage points (3%) on the same period in 2016.

The VCT AIM Quoted sector was the top performer of the year, up 18%, followed by the VCT Specialist: Environmental sector, which returned 6%.

Annabel Brodie-Smith, Communications Director, Association of Investment Companies said: “Investment companies have performed strongly in 2017 with the European and Japanese Smaller Companies sectors leading the way, having benefited from favourable election results. The overseas sectors have performed strongly due to healthy economic growth and sterling’s weakness. In contrast, Brexit uncertainty has been a headwind for the UK sectors.

“It’s interesting to look at the short-term winners but investors need to have a balanced portfolio and a long-term view. One year’s underperformers can be next years star performers, showing how important it is not to react to short-term market movements. The investment company sector houses a broad variety of sectors, risk profiles and geographical exposure, and investors need to consider their investment objectives and risk profile when looking at potential investments. If investors have any concerns they should speak to a financial advisor.”

Top performing investment company sectors over year-to-date – % share price total return to 30 November 2017. Source: Morningstar.

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