The 32 investment funds that could have made you an Isa millionaire

There are 32 investment trusts that would have done this made investors more than £1 million if they had put their entire Isa allowance into the same trust every year since 1999, the data shows.

If they had put their full annual allowance into each of these trusts for 25 years, investors could have joined the ranks of Isa millionaires.

According to the Association of Investment Companies, HgCapital Trust, an investor in software and technology services, is said to have delivered the highest returns, netting investors a total of £2.3 million between 1999 and 2023, based on a total investment of £306,560 across the period.

Investing your entire Isa balance in one place is obviously against the investment principle of diversification and is not recommended.

However, it is a useful example of the good performance of investment trusts since 1999.

Isas, or individual savings accounts, protect your savings or investments against tax on interest, profits and dividends. In short, Isas are a tax-efficient way to save money.

Currently the annual Isa allowance is £20,000 per year. This has risen from £10,000 in 1999, spread over a limit of £7,000 for a shares Isa and £3,000 for a cash Isa.

Cash Isas are available to any UK resident over the age of 16, while stocks and shares Isas are available to those over 18.

Jim Strang, chairman of HgCapital Trust, said: “It is very encouraging that the company has been able to deliver such compelling shareholder returns over the past 25 years.

‘This is a solid confirmation of the private equity model and the skills and expertise that the manager, Hg, has deployed so successfully in the past period.’

The second best performing fund was Allianz Technology Trust, which invests in global technology companies.

If the same investor had wagered their entire Isa allowance since 1999, it would have generated £2.1m in returns. Fellow technology investor Polar Capital Technology is said to have returned £1.9 million over the period.

“As we often remind investors, we are arguably living in the golden age of technology, with companies in most industries becoming relevant or irrelevant depending on their adoption and use of technology,” said Mike Seidenberg, portfolio manager of Allianz Technology Trust .

The fourth best performing fund, Scottish Mortgage Investment Trust, also invests 21 percent of its capital in the technology sector and is said to have achieved a return of £1.6 million.

However, Scottish Mortgage has proven controversial among investors in recent times due to its exposure to unquoted investments, against the backdrop of a difficult economic environment.

Both Scottish Mortgage and HgCapital invest at least part of their portfolios in unquoted companies.

Scottish Oriental Smaller Companies are said to have achieved the fifth highest return at over £1.5 million.

The trust is one of four Asia-focused trusts to have achieved returns in excess of £1m. Of these, both Abrdn Asia Focus and Pacific Horizon Investment Trust were among the top ten performers.

“It has been a challenging time for investors recently, with high inflation coupled with geopolitical tensions and an uncertain outlook,” said Annabel Brodie-Smith, communications director at the Association of Investment Companies.

‘In difficult times it is important that investors take a long-term approach to their investments.

“Investment funds have been around for more than 155 years and have survived two world wars, the Great Depression, the high-inflation era of the 1970s, the tech boom (and bust), the financial crisis and the pandemic.”

Of the 32 best performing funds, more than a third invest in smaller companies, with four of these companies focusing on the UK sector. BlackRock Throgmorton Trust was the best performer of these, raising £1.2 million.

Scottish Oriental Smaller Companies, Abrdn Asia Focus and Fidelity Asian Values, meanwhile, are all focused on the smaller companies sector in Asia Pacific.

Despite the returns offered by these investment trusts, it is essential that investors avoid putting all their eggs in one basket in order to limit risk.

“When investing, it is crucial to diversify your risk because no one knows which will be the best-performing mutual funds in the future,” Brodie-Smith said.

‘A diversified portfolio that meets your needs is the best path to long-term success. If investors are unsure about which trust is right for them, it is important to speak to a financial advisor.”