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A FTSE 100 tracker fund can be a good way to get exposure to the UK stock market. However, given the average returns from this index (around 6.3% over the last 20 calendar years with dividends included), it’s likely that there will be products that provide higher returns over the next five years.
Here, I’m going to highlight two global investment trusts I reckon will beat the Footsie quite comfortably over the next half decade. Both have exceptional long-term performance track records and I think they warrant consideration today.
Focusing on exceptional growth companies
First up, we have Scottish Mortgage Investment Trust (LSE: SMT). Popular with those who are looking to beat the market, it’s focused on ‘exceptional’ growth companies in areas such as artificial intelligence (AI), cloud computing, healthcare innovation, and FinTech.
This trust invests in some brilliant publicly-listed companies. For example, within the 10 holdings we have names like Amazon, Nvidia, and Taiwan Semi.
It’s also invested in quite a few world-class unlisted companies. Names here include the likes of SpaceX, ByteDance, and Databricks.
Given this mix of holdings, I expect the trust to do well in the years ahead. As the technology revolution unfolds and the world becomes more digital, a lot of Scottish Mortgage’s holdings could prosper.
It’s worth pointing out that this trust can be volatile at times due to its tech focus. In 2022, for example, it underperformed the FTSE 100 significantly.
I’m optimistic about the long-term potential though. Over the last 10 years, the trust’s returned about 16% a year, although past performance isn’t an indicator of future returns.
One of the world’s top stock pickers
The other investment trust I want to highlight is Pershing Square Holdings (LSE: PSH). This is managed by hedge fund specialist Bill Ackman, who’s widely regarded as one of the world’s great stock pickers.
I really like Ackman’s investment approach. Generally speaking, he invests in high-quality growth businesses when he believes the market’s ignoring their potential so there are elements of value investing, growth investing, and quality investing here.
Typically, he only holds around 10-15 stocks at one time (so it’s a concentrated fund). Some examples of stocks in the portfolio today include Amazon, Alphabet, Uber, and Hilton.
Now, this approach has worked well for Ackman (and his investors) over the years. In the last 10 years, the fund’s returned about 10% a year when dividends are included – well ahead of the returns from the FTSE 100.
Of course, the concentrated nature of the fund means there are risks for investors – if Ackman picks the wrong stocks, performance could be disappointing. All things considered though, I see a lot of potential and believe it’s worth a closer look, especially while it’s trading at a significant discount to its net asset value (NAV).
