All UK Investment Trusts are Not the Same

Abstract

Drawing on an agency theoretic framework, this paper examines the relative performance of eight categories of investment trusts from the period 1994-99. Unlike earlier work, two benchmarks are employed, the average annual performance of a given fund category and a relevant market index. It also tests for the relationship between fees and performance, and looks for evidence of fund specific behaviour. The results are not unambiguous. Some evidence points to fund level persistence in performance, boldness in risk taking, and a negative effect on variance from previous performance. Fund specific behaviour was also found. Using a variety of definitions for fees, virtually no relationship with performance could be established.

Keywords: relative performance of UK investment trusts, agency theoretic approach