UK small and mid caps dominated the table of best-performing investment trusts in 2019, despite the asset class being out of favour for the majority of the year due to Brexit uncertainty.
The Association of Investment Companies' (AIC) UK All Companies and UK Smaller Companies sectors were the second and third best performers in the year, with their average constituent returning 39.3% and 37.9% respectively.
Trusts in those two sectors accounted for more than half of the top 20 best-performing trusts last year, Morningstar data shows.
Five were in the top ten, with JPMorgan Smaller Companies the second-best performer in the year and BlackRock Throgmorton third, returning 67.5% and 60.5% respectively.
Other UK trusts in the top ten were Standard Life UK Smaller Companies (59%), Schroder UK Mid Cap (58.7%), Aberdeen Smaller Companies Income Trust (57.7%) and JPMorgan's Mercantile (53.9%).
"The UK has been an unfashionable place to invest for several years given the gloom surrounding Brexit and continuing political uncertainty, but these figures demonstrate that active investment company management has delivered in an impressive way," said the AIC's communications director Annabel Brodie-Smith.
Analysts at broker Stifel said UK small and mid-cap trusts "benefited from strong net asset value (NAV) performance and were further boosted as their discounts narrowed substantially".
They noted, for example, that Throgmorton's NAV increased by 40%, meaning its discount narrowed from 10% at the start of 2019 to 4% by year-end.
But those returns were eclipsed by Golden Prospect Precious Metals, which rallied the hardest, gaining 77.5% for shareholders in 2019.
The prices of both gold and silver hit all-time highs throughout the year as geo-political uncertainties continued to hang over investors. The trust invests primarily in gold and silver miners, which are seen as a leveraged play on the prices of their respective metals.
Technology sector leads the pile
On a sector basis, technology unsurprisingly led the pile, with the average trust in the AIC Technology & Media sector returning 40.1%. That was mainly led by Ben Rogoff's Polar Capital Technology and Walter Price's Allianz Technology Trust, which gained 43.7% and 35% respectively.
Adrian Lowcock, head of personal investing at Willis Owen, noted that investors had remained attracted to companies offering high consistent growth during the 2010s, a period where interest rates and growth in general have remained low.
"Technology, having been in the wilderness since the bursting of the dotcom bubble, lead the way with a new generation of tech companies from Facebook to Netflix offering investors huge growth potential," he said.
Brodie-Smith added: "With technology forming a bigger and bigger part of our everyday lives, from the way we work and communicate to how we shop and watch TV, it's easy to see why this is such a big growth area."
The leasing sector, meanwhile, was the worst performer, with the average trust losing 17.7%. Stifel said this was led by sharp falls in the aviation leasing funds including Amedeo Air Four Plus, DP Aircraft I, Doric Nimrod Air Two and Doric Nimrod Air Three. All four fell by 20% to 30%.
"The falls were caused by Airbus's decision to close [its] A380 [passenger airliner] programme and raises significant questions about the residual values of these planes once their leases come to an end," Stifel said.
At the bottom of the pile was Riverstone Energy, which lost almost two-thirds, or 61.5%, of its value in the year, followed by Adamas Finance Asia (-59%) and Ashmore Global Opportunities (-59%).
They were just ahead of Woodford Patient Capital, which lost 53.3% for shareholders after the liquidity crisis that engulfed manager Woodford Investment Management in the second half. The fund has since switched to Schroders and is now called Schroder UK Public Private Trust.
Brodie-Smith concluded: "Whilst it's always interesting to look at the year's best-performing investments, it's important to remember that when it comes to investing the future is more important than the past.
"One year's top performer could have difficult times ahead. It is best to have a well-diversified portfolio that suits your needs and to take a long-term view."