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Julian Gibbs

I have just been looking at long-term trends of the major unit trust sectors. One particularly interesting feature is that UK equity income trusts have outperformed the UK all companies sector over five, 10, 15 and 20 years.

UK equity income is the best performing unit trust sector of all over 20 years, having turned £1,000 into £10,122.

Over five, 10 and 20 years, UK smaller companies have outperformed UK all companies trusts, as well as UK equity income trusts over five and 10 years.

Another interesting point is that European, North American and Japanese smaller companies trusts have outperformed their major company equivalents over nearly all periods. There are, of course, exceptions to this.

Top fund managers, such as Nigel Thomas of Framlington and Anthony Bolton of Fidelity, have performed exceptionally well and both often invest more than a third of their fund in smaller companies.

Whilst the Europe excluding UK sector has been in the doldrums over the last five years and is the worst performing of all the major sectors, it is still the second-best performer over 20 years. With many European fund managers being pessimistic about the outlook for Europe, it may well be the time to take a contrarian view and invest in this sector before it recovers.

The Far East and Japanese smaller companies sectors are the best performers over five years.

Taking a long-term view, over 20 years, all the fixed-interest sectors are among the worst performers, underperformed only by Japan – and even that sector has risen by over 200 per cent over the 20-year period. I believe this sector, too, is undervalued and may well be one of the best performing sectors over the next year or so. Taking a contrarian view often pays off.

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