Specialist Investment Trust of the Year: top specialist investment trust this year is the Merrill Lynch World Mining trust

What Investment, July, 2003

The Best Specialist Investment Trust category is a new one for the What Investment Awards, and it brings with it its own set of problems. First and foremost is the difficulty in trying to compare the performance of a number of different trusts, which may specialise in very different areas. As Charles Cade, head of investment trust research at Close WINS, points out, it's not always easy to compare these funds to a peer group or universe due to the specialist nature of their mandate.

This diversity is borne out by the fact that this category had the longest shortlist of all our awards and that the top four comprises a global mining sector specialist, a venture and development capital fund, a property sector trust and a smaller companies fund.

In the end, two of our panel opted to put Merrill Lynch World Mining at the top of their lists, which was sufficient for it to carry off the prize. As the name suggests, this is a trust that specialises in the global mining sector. Currently with assets of 240 million [pounds sterling], Merrill Lynch World Mining is sometimes classified in a sector on its own, although it appears in the What Investment performance tables in the catchall "undefined" category.

The trust was launched in 1993, initially as a closed-end version of the existing Merrill Lynch (at the time Mercury) Gold & General open-ended fund. This had been set up by gold specialist Julian Baring, and, following his retirement, responsibility for both was taken over by Graham Birch.

"You can't ignore the fact that it is miles and miles ahead of the mining indices, which is difficult to achieve in a limited universe," says Nick Greenwood, head of investment trusts at iimia. Charles Cade agrees: "Although the global mining index has been strong, Graham Birch has consistently added value for shareholders in Merrill Lynch World Mining."

The runner-up spot this year was secured by Schroder Ventures International, which was set up in 1996. As the name suggests, this is a specialist venture and development capital vehicle, which invests in venture capital funds originally put together by Schroders' venture capital arm, Schroder Ventures (recently renamed Permira). This company invests internationally, primarily in management buy-outs and development capital situations. The trust has assets of 515 million [pounds sterling].

"The Schroder Ventures International team has produced some excellent results in a difficult environment," says Tony Lanning, investment director of Advisory & Brokerage Services.

"This trust has shown a substantial outperformance of its peers, although not by as much as some others on the shortlist," says Greenwood. "For example, its numbers are significantly better than those for Pantheon, the other venture capital fund-of-funds specialist on the shortlist."

In third place is TR Property. One of the oldest of the specialist investment trusts (it dates back to 1905), this trust's portfolio has been managed by Chris Turner at Henderson Global Investors since 1995. Current total assets stand at 396 million [pounds sterling], and the trust's investment policy is to hold a mixture of property shares in the UK and in Europe, and direct property investments (currently around 20 per cent is directly invested).

"TR Property has a very limited universe to choose from, so the width of its outperformance is impressive," says Greenwood.

The top four

1 Merrill Lynch World Mining

2 Schroder Ventures

3 TR Property

4 Aberforth Smaller Cos