Ian Hargreaves may have stepped back as head of Invesco Asia (IAT ) this year, but his input in the outperformance of the trust over three years regained him a Citywire AA rating in October.

Hargreaves (pictured above), who has worked on the trust since 2011, handed the role of lead manager to Fiona Yang at the start of the year as part of a succession plan. It is not the only major shake-up this year as the £250m portfolio confirmed last month it would be merging with its larger Abrdn-run rival, Asia Dragon (DGN ), swelling assets to about £815m.

Asia Dragon chair James Will said Invesco had impressed the board with its ‘distinctive and disciplined value-oriented investment approach’, which helped extend its gains over the MSCI AC Asia ex Japan index benchmark over the three years to the end of  September, returning Hargreaves to an AA rating, having slipped to an A rating in August and September.

Yang does not have a Citywire rating yet because she has not been lead manager for the required 36-month period.

More recently, the pair’s decision to hold 40.5% of the portfolio in China and Hong Kong, the biggest allocation of any Asia trust and more than the 36.5% index weighting, knocked returns as the world’s second-largest economy has struggled.

Henderson double

Janus Henderson manager David Smith saw his Citywire rating bumped up to A for the first time as both of his UK income trusts remain ahead of the pack.

Smith manages the £279m Henderson High Income (HHI ) and is co-manager of the City of London (CTY ) trust with AA-rated Job Curtis.

Both Henderson High Income and City of London have extended their lead over the FTSE All Share index.

City of London, which lost a Citywire investment trust award to UK equity income rival Temple Bar (TMPL ) this week, has delivered 58 years of consecutive dividend growth, marking it out as an Association of Investment Companies (AIC) ‘dividend hero’.

Smith and Curtis are optimistic about the outlook for UK stock markets. Although weaker global growth is leading to cuts in interest rates, they said the Bank of England may take ‘a relatively cautious approach to future rate cuts given the continuing high level of wage increases’.

‘The valuation of UK equities is compelling compared with their equivalents overseas, possibly due to the low allocation from domestic institutional investors,’ they said in their latest factsheet.

‘In particular, we find the dividend yield of UK equities attractive relative to the main alternatives.’

How the ratings work

Citywire awards managers a top AAA rating if the three-year risk-adjusted performance of their investment trust is among the very best in their sector.

There are also AA, A and + ratings for managers outperforming their benchmarks by smaller amounts.  

You can find the full inaugural list here.

It shows 51 portfolio managers working in 33 investment companies in the UK, Asia, global emerging markets and healthcare, among other areas. Some are well known, others less so.

The  ratings cover 30 equity investment company sectors.

How the ratings are calculated

Our investment trust manager ratings are three-year risk-adjusted measures of the movement in a trust’s net asset value (NAV). They are based on the ‘information ratio’, which is a measure of a fund manager’s skill against a benchmark.

The benchmarks are applied at the trust level, using month-end cum fair NAV. This methodology is consistent with our annual Citywire Investment Trust Awards and our established fund manager ratings.

For a fund manager to be considered for a rating, they need a 36-month track record. Each trust they manage also requires a 36-month track record, unless it aligns with a trust in the same sector and is assigned the same benchmark as an eligible trust.

Any manager who delivers positive risk-adjusted returns across all the eligible investment trusts they manage, against their benchmark, net of fees, over a rolling 36-month period, will receive a rating. To reiterate, we use the NAV of the investment trust to calculate the return rather than its share price.

The top 10% of managers receive an AAA rating.

The next 20% receive an AA rating.

The next 30% receive an A rating.

The remainder receive a + rating.

How to use the ratings

We believe the ratings help investors in their research and identify good investment company fund managers.

To be clear, however, we are not saying an investment company run by a Citywire-rated fund manager is automatically a ‘buy’, or that you should sell an investment company because its manager has lost their Citywire rating.

The Citywire rating simply indicates that a fund manager is generating comparatively good returns for the risk he or she is taking with investors’ money.

Whether you buy shares in the investment company will depend on various factors, such as whether you want the particular market exposure it provides and whether its shares are trading close to the value of the company’s investments or they are on a ‘premium’ above or ‘discount’ below their NAV.

Nevertheless, we firmly believe the new Citywire ratings are a vital tool for any investor interested in London-listed investment companies.

We look forward to publishing the ratings every month and highlighting the listed funds and fund managers they refer to. We hope you find them useful too.