Best performing funds and trusts since ISAs began

Laith Khalaf
22 March 2021

•    Smaller Companies and Asian funds dominate performance since 1999
•    UK Smaller Companies have beaten the US stock market over that period
•    Scottish Mortgage just squeaks into the top 10 performers
•    Reinvested dividends make up 96% of FTSE 100 returns since 1999
•    Small cap funds for this year’s ISA

Laith Khalaf, financial analyst at AJ Bell, comments:

“1999 wasn’t exactly an auspicious time to start investing. The tech bubble was about to burst, the split cap investment trust scandal was about to explode, and stocks were about to fall into a three-year bear market. But despite that, the first ISA savers have been rewarded by putting their best foot forward and investing money in the market.

“Over the last 22 years, the average fund sector has turned £1,000 invested into £4,257 today. There have been some spectacular returns from funds investing in UK Small Caps and Asian equities over the period too. Funds in the UK Smaller Companies sector have significantly outperformed the underlying index, showing the benefit of active management in picking out tomorrow’s winners from today’s stock market minnows. 

“There has been much hullabaloo about the strength of the US stock market, but actually UK small and mid-caps have shown a clean pair of heels to the S&P 500 since 1999. They have also beaten the big blue chips of the FTSE 100 hands down. Indeed, if you look purely at returns from share price appreciation, the Footsie is barely registering a gain in 22 years. Thanks to dividends reinvested though, the total return on offer was 127.1%. 

“The superior performance of smaller companies funds is apparent across all developed markets, so it might be a good idea for today’s investors to think small with their ISA portfolio. Recently investors have looked to cryptocurrencies and meme stocks to get rich quick, but they might instead consider the stunning returns provided by some smaller companies funds, given time to grow.

“In markets today there are clear resonances with 1999, with signs of bubbly behaviour in the price of Bitcoin and meme stocks, and a tech sector that has been on a tremendous run. The big tech titans of the US market are much more robust than many of the flimsy start-ups of the late 1990s, but their high valuations still give some cause for caution. However, investors can take heart from the long term returns that have been harvested since 1999 across all equity markets, despite turmoil in the first few years of the millennium. 

“While the risk of falling prices might put some off investing in the stock market, they should consider the cost of missing out on gains too. With an economic recovery in sight and a powder keg of monetary and fiscal support scattered all over the place, it’s perfectly possible that markets will continue to climb upwards. And if inflation becomes a problem, share price appreciation and dividend increases can provide some protection that at current levels, cash interest rates do not. 

“It’s important to keep balance in your savings, using cash for short term needs, and feeding money that can be left untouched for longer into the market. As ever, the ISA wrapper provides valuable protection from income tax and capital gains tax, meaning you get to keep more of the profits your investments make.”

Best performing funds and trusts since April 1999

The following table shows the ten best performing open-ended funds since 6th April 1999. Half the list is made up by UK Smaller Companies funds, with the remaining half featuring funds investing in China, European Smaller Companies funds, and the Pictet Biotech fund. Exposure to the far east and the healthcare and biotechnology sectors also feature heavily in the list of top investment trusts over this period. 

The returns from these funds and trusts since 1999 has been remarkably high, despite the market blow out right at the start of this period. Investors’ faith and patience has been rewarded by their initial investment being multiplied many times by these investments. All of these funds are what renowned US fund manager Peter Lynch would call tenbaggers - investments that return more than ten times their initial purchase price.


Performance since 6th April 1999


% total return

£1,000 invested

Marlborough Special Situations



Schroder ISF Greater China



Threadneedle European Smaller Companies



Artemis UK Smaller Companies



BlackRock UK Smaller Companies



Janus Henderson China Opportunities



Janus Henderson European Smaller Companies



TB Amati UK Smaller Companies



Liontrust UK Smaller Companies



Pictet Biotech



Average fund sector*



Source FE Total Return to 15/03/2021
*The average performance of all Investment Association sectors over this period, this figure can be used as a proxy for average investor returns. 

The best performing open-ended fund by quite some margin is the Marlborough Special Situations fund, run by Giles Hargreave and his team. With around 135 holdings, it’s well-diversified, and while it invests mainly in smaller companies, it does hold some midcaps too. The Marlborough Special Situations fund has also performed better than any investment trust, even the revered Scottish Mortgage Investment Trust, which itself has done exceptionally well as a result of early investment in some of today’s biggest technology companies. 

As a whole, the top ten investment trusts have beaten their open-ended counterparts. That’s to be expected over a long time frame, seeing as unlike open-ended funds, investment trusts can borrow money to invest in the market, adding risk, but also exacerbating strong performance. Also until the Retail Distribution Review in 2012, the costs of holding open-ended funds on a platform were effectively priced into the fund’s charges, while for investment trusts they were paid separately, which is how platform charging for both funds and trusts works now.

Investment trust

Performance since 6th April 1999


% total return

£1,000 invested

Baillie Gifford Pacific Horizon



Aberdeen Standard Asia Focus



Gresham House PLC



Scottish Oriental Smaller Companies



HgCapital Trust



Worldwide Healthcare Trust



The Biotech Growth Trust



JPMorgan China Growth & Income



Primary Health Properties PLC



Scottish Mortgage Investment Trust



Source FE Total Return to 15/03/2021

Market performance since April 1999

Since ISAs began, international markets have delivered better returns than the broad market here in the UK, as measured by the FTSE All Share. Indeed, the main constituents of the UK stock market, the FTSE 100 blue chips, have largely gone sideways in terms of capital growth, posting share price appreciation of just 5.2% over 22 years. However, investors who have rolled up dividends would have still enjoyed growth of 127.1%, or in other words, would have turned £1,000 into £2,271. These reinvested dividends make up 96% of FTSE 100 returns since 1999.


Capital return %

Total return %

UK Equity Indices



Index : FTSE 100



Index : FTSE 250



Index : FTSE All Share



Index : FTSE Small Cap



Index : Numis Smaller Companies plus AIM (excluding investment companies)



Sector : IA UK Smaller Companies (average UK Smaller Cos fund)






Overseas Equity Indices



Index : MSCI AC Asia Pacific ex Japan



Index : MSCI Europe ex UK



Index : S&P 500 (US)



Index : TSE TOPIX (Japan)



Source: FE Total Return in GBP 06/04/1999 to 15/03/2021

UK smaller companies indices have significantly outperformed the broader FTSE All Share, and the main overseas stock markets too, including the much vaunted S&P 500, home to the likes of Apple, Amazon and Facebook. Indeed, the pattern of outperformance from smaller companies compared to broader multi-cap funds holds true across the global investment universe (see table below). 

Table: Investment Association Multicap funds versus Smaller Companies

The table below shows the performance of the main Investment Association sectors investing in developed markets, and their smaller companies counterparts. Funds in the main sectors are typically heavily skewed towards large caps, with some mid cap exposure too. But in all four regions smaller companies have significantly outperformed the main blue chip sectors.

Investment Association Fund Sector Average

Total return since April 1999

IA Europe Excluding UK


IA European Smaller Companies


IA Japan


IA Japanese Smaller Companies


IA North America


IA North American Smaller Companies


IA UK All Companies


IA UK Smaller Companies


Source FE Total Return in GBP 06/04/1999 to 15/03/2021

Smaller companies funds tend to be more volatile than blue chip investments, but they have the potential for significant outperformance over the long term for two reasons. The first is the market itself is likely to deliver better returns, because the companies in the index have greater capacity to grow; they are often small fish in a big tank. The second reason is that active managers can make an extremely telling difference in the smaller companies market, because it is less heavily analysed, so fundamental research can reap significant rewards. The average UK Smaller Companies fund has returned 756.6% since 1999, compared with 450.9% from the underlying market, as measured by the Numis Smaller Companies plus AIM (excluding investment companies) index. That’s quite some outperformance and a serious vindication of active management in this area.

Small cap fund suggestions for this year’s ISA

TB Amati UK Smaller Companies  
Dr Paul Jourdan has been running this fund for over twenty years and the whole team is steeped in experience when it comes to small cap investing. They look for high quality companies with competitive advantages. They have a emphasis on the AIM market, but they can invest in stocks all the way up to the FTSE 250.

Standard Life UK Smaller Companies Trust 
Fund manager Harry Nimmo has been running this trust since 1993. He wants to invest in tomorrow’s largest companies today, and so runs a concentrated portfolio of smaller companies with good growth prospects and robust finances, so they can weather the occasional storm.

Tellworth UK Smaller Companies  
Paul Marriage and John Warren don’t invest in oil & gas, mining, or biotech, preferring instead to focus on more predictable areas of the market. They look for market leaders that have pricing power, as well as misunderstood companies that are going through a period of change.

Laith Khalaf
Financial Analyst

Laith Khalaf started his career in 2001, after studying philosophy at Cambridge University. He’s worked in a variety of roles across pensions and investments, covering both the DIY and the advised sides of the business. In 2007, he began to focus on research and analysis, and has since become a leading industry commentator, as well as a regular contributor to the financial pages of the national press. He’s a frequent guest on TV and radio, and for several years provided daily business bulletins on LBC.

Contact details

Mobile: 07936 963 267

Follow us: