The average investment company was neither up nor down, with a £100 investment over six months to 30 June 2011 remaining at £100. The average discount widened slightly, from 8% at the year end, to 9% at 30 June 2011.

With markets so uncertain, it is interesting to see that the Property Direct: Europe sector has seen discounts narrow most from 44% six months ago to 30% at the end of June 2011. Other sectors which saw their discounts narrow include Property Securities, Hedge Funds and Global High Income (see table on page 3).

Specialist sectors dominate

There were some winners too in the first half of the year, particularly in the specialist sectors. Property Direct: Europe was the top performer over six months to 30 June 2011, up 32%. But with average net gearing in this sector standing at 162% against an industry average of 7%, it is not for the faint hearted. Property Securities was the second top performing sector over six months, up 14%, with an average gearing level of a more modest 4%, followed by Private Equity, which was up 13%. Nevertheless, discounts in the Private Equity sector have been largely unchanged on average over the last six months, and were an average of 25% at 30 June 2011.

Illustrating the dominance of specialist funds over the last six months, the top performing AIC Members were El Oro (Sector Specialist: Commodities and Natural Resources), up 50%, Sirius Real Estate (AIM) (Property Direct: Europe), up 45%, Greenwich Loan Income (AIM) (Sector Specialist: Debt), up 42%, Real Estate Credit Investments (Sector Specialist: Debt), up 41% and Tamar European Industrial (Property Direct: Europe), up 36%.

Net Gearing

Across the investment company industry as a whole net gearing on average has been unchanged, and was 7% at 30 June. The Private Equity sector was an exception, with gearing on average down from 15% six months ago to 7% at 30 June 2011. The European Smaller Companies sector was another notable exception, with gearing down from 10% at the end of December to 4% at the end of June 2011. This perhaps reflects instability in the Eurozone and both these sectors have also benefitted from strong performance which will have increased their assets and therefore impacted on gearing levels.

A good year for UK Smaller Companies

Whilst the investment company sector has tended to move sideways over the last six months, over the last year things are looking up, with the average investment company up 19%. UK Smaller Companies was the top performing sector, up 42%, with Strategic Equity Capital, also a UK Smaller Companies fund, the top performing AIC Member, up 76% (over six months, the fund is up 31%). Standard Life UK Smaller Companies was not far behind, up 70%, making it the second best performing AIC member (over six months it is up 8%).