The 30 investment trusts that would have made you an ISA millionaire

Just under half of the ISA millionaire investment companies invest in smaller companies, reflecting the potential of smaller companies to outgrow larger peers.

A total of 30 investment companies had the potential to make investors ISA millionaires.

This assumes investors had enough spare capital to maximise the ISA allowance, as well as having the insight and conviction to invest in a single trust.

The research, from trade body the Association of Investment Companies (AIC), calculated the total return of £266,560 in contributions invested on 6 April every year for the past 23 years.

Technology trusts dominate performance charts, with HgCapital (LSE:HGT), Scottish Mortgage (LSE:SMT), Allianz Technology Trust (LSE:ATT) and Polar Capital Technology (LSE:PCT) all in the top five.

Investors could have a portfolio worth more than £2 million if they had invested everything in HgCapital, which invests in private business software companies.

It displaced Scottish Mortgage from the top of the list this year after investors dumped the fast-growing but often unprofitable stocks that the UK’s largest investment trust specialises in buying. Savers would have accumulated around £2 million as well if they had backed Scottish Mortgage every year since 1999. 

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Investors who picked Allianz Technology and Polar Capital Technology, which both focus on publicly listed American technology stocks, would have seen their money grow to £1.75 million and £1.56 million respectively.

Investment companies that buy smaller companies also feature heavily on the list. The best-performing of these is Aberdeen Standard Asia Focus (LSE:AAS), which would have returned £1.4 million, sixth place in the table.

In total, 14 of the 30 ISA millionaire investment companies are invested in smaller companies, reflecting the potential of smaller companies to outgrow larger peers.

Despite the exceptional returns achieved, investors should not invest all their ISA allowance into just one investment trust. Buying only one investment trust carries the risks being caught out if there are big swings in the types of companies that perform well.

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For example, over the past six months Scottish Mortgage shares have dropped 28% as investors have backed mature and cheap stocks over speculative growth stocks in the face of rising interest rates.

This rotation in investors’ preference for “value” firms, such as mining and oil companies, over expensive ones in the tech sector, could continue for some time if inflation does not subside. 

Annabel Brodie-Smith, communications director of the AIC, said: “It’s always important to spread your risk, as no one knows which will be the best-performing investment companies in the future. Having a diversified portfolio which suits your long-term needs is key.”

ISAs were introduced in 1999, initially with a £7,000 annual contribution limit. In 2017, the cap was increased to £20,000, which is still the limit today.

The 30 investment trusts that would have made you an ISA millionaire

Source: Association of Investment Companies.