It is that time of year again when we ask for your views on which investment companies and managers are doing the best job for you. Once again, to reward you for your efforts, we are offering one lucky reader the chance of winning £5,000.

As we did last year, we compiled some performance statistics on every London-listed investment company and submitted this data to a panel of expert judges. They were tasked with whittling down the long list into a short-list of four nominees in each of 12 categories. However, when it came to the short-list for best large asset manager, they felt only three companies made the grade.

Normally, you might expect me to wax lyrical on the merits of the shortlisted companies, but I do not want to skew the votes one way or another – this is about discovering what you think. However, I do have some observations.

Past performance is not necessarily a guide

The data that the judges used was to the end of March. Happily, this avoided it being distorted by the massive selloff and subsequent rebound in markets (and discounts) that we saw over the first couple of weeks of April in connection with “Liberation Day”.

President Trump’s antics have been the major influence on returns over 2025 and it seems likely that this will continue. One of his policy goals – driving down the US dollar – is working and my suspicion is that this will have a way to go yet. I think that this could turn the investment landscape on its head as investors start to worry about their US exposure and money flows out of US assets into long neglected parts of the world. We are already seeing some signs of that, as most markets have outperformed the US this year.

Good performance over the five years to end March 2025 was an important factor in making it onto the shortlists. However, the warning “past performance is not necessarily a guide to the future” that you’ll see on all our research notes is there for a good reason. When you are picking your favourites, please have a think about which managers you feel are best placed to succeed over the long term, not just who has made you money recently.

Capital or income, or both?

When we were devising the categories, we were thinking about: what do investors look for when choosing a fund?

The simplest choice is often between investing for capital growth and investing for income. However, that does not have to be a binary decision as quite a few trusts aim to offer both. One of the attractions of the closed-end structure is the ability to be creative with the structure.

Many trusts have built up revenue reserves over the years. These provide a cushion in lean times and can make dividends from investment trusts more reliable than dividends from equivalent open-ended funds.

Paying dividends from capital profits is an increasingly popular approach to lift the dividend yield from an investment approach that would not normally generate much income naturally. Enhanced dividends of 4%, 5% and even 6% are now available on many trusts. It helps that many of us hold our investments within wrappers such as ISAs and self-invested pension plans (SIPPs), otherwise the tax implications of this could be painful. However, it is important to remember that if your main aim is saving for capital growth, these dividends need to be reinvested fairly promptly.

Small is beautiful – in the end

Smaller companies have struggled in recent years, but there is plenty of evidence that – over the long term – small-cap stocks outperform large ones. In an uncertain world, investors tend to prize liquidity. Small caps are also perceived as riskier than large caps. However, in many places the gap between small-cap and large-cap valuations has become overly stretched. In Europe, we have seen this start to narrow – small-cap trusts have beaten large-cap trusts in Europe over the past year. In the UK, this hasn’t really happened yet although there are always exceptions as the track record of some of the nominees shows.

Outsource your difficult decisions

For any investor, there are many parts of the market that are just harder to get your head around. Over the years, teams of specialists have launched investment companies that focus just on one industry – financials, healthcare, mining, and the like. Sometimes those sectors go in and out of fashion, but the closed-end structure should allow managers the freedom to make investments at the bottom of the cycle so that shareholders will reap the rewards when sentiment turns. Even when things are going well, as they are in the technology sector currently, the ability to hold concentrated portfolios within investment company structures can give managers an edge.

The ability to outsource to experts in a field also comes in useful when investing in far flung parts of the world. Speaking the language and being embedded within the local culture can give insights that aren’t available to a manager stuck behind a desk in London or New York. The investment companies sector can be rightly proud of the track records of some of its regional/country specialist management teams.

Alternatives for everyone

There has been some debate in the press recently about the government’s desire to see more of our pension funds invested in private assets – which in our world includes private equity, growth capital, infrastructure, renewable energy, leased assets in areas such as aircraft and ships, and some specialist debt funds.

There is a Pensions Bill working its way through parliament currently that, among other things, will create powers enabling the government to compel pension schemes to invest a percentage of their portfolios in private assets. However, the Association of Investment Companies has spotted a problem in the draft legislation. As currently drafted, pension schemes would not be able to meet this requirement by investing in listed investment companies that invest in these assets. That is clearly daft, and the AIC has said so. Hopefully, the government will listen.

One of the strengths of the investment companies sector is the way that it provides liquid access to illiquid assets.

LTAFs (long term asset funds), which are the latest fad idea, provide illiquid access to illiquid assets, which seems a bit pointless to me.

As we have recognised in this year’s awards, the sector’s alternative investment companies tend to fall into two categories – those that primarily provide an attractive dividend yield, and those that are more focused on generating capital growth. That is why we have split the alternatives category in two this year.

Shrinking property

The large numbers of corporate actions, including a fair few takeovers, have shrunk the field in the property category to the point where we wonder whether this has gone too far. The backlash against the private equity bid for Assura and the success of the bid from UK-listed Primary Health Properties might be an indication that investors can see the bottom in some property sectors at least and don’t want to lose the ability to hang onto some exposure here. This sector might even be the first to see some new companies launched after a long drought for investment company IPOs. It’ll be interesting to see how things stand this time next year.

Please do vote!

Apart from dangling the £5,000 prize as an incentive to participate, we would also appeal to you on behalf of the industry. The nature of the news cycle is that the negative stories attract all the headlines. However, there are some real success stories within the investment companies sector and these deserve to be celebrated. Boards and managers really care what you think, please use this as one way of showing your appreciation.

VOTING IS OPEN