The past year has been bruising for most investment trusts (managed funds listed on the stock market). Yet one often overlooked sector has managed to soar head and shoulders above the rest.

According to data from trade body the Association of Investment Companies (AIC), private equity has been the top-performing sector over the last 11 months, returning 43pc compared to just 3pc for the average investment company across the same period.

How has private equity achieved such stellar performance?

Together with the technology sector – up 37pc – it has significantly outpaced all other sectors, including Europe and UK All Companies.

Considering the significant challenges the sector has faced in 2024, this may come as a surprise. Higher interest rates are particularly bad news for private equity, as they increase the cost of financing their portfolio companies’ debt, potentially reducing returns.

The AIC’s findings may inspire investors to think twice about this part of the investment landscape which is often overlooked by DIY investors.

Private equity-focused investment trusts give investors exposure to unlisted companies they might not otherwise have access to. Although private businesses can be higher risk, they also have the potential to deliver high returns.

A company’s growth can sometimes be strongest before it lists on the stock market. By investing at a much earlier stage, you can profit from that extra growth, the sales pitch goes.

However, the sector’s seemingly stellar performance should be taken with a pinch of salt.

That is because, once you dig into the data, it’s clear that one private equity investment trust, 3i, has outperformed its peers by a considerable margin in 2024.

Ewan Lovett-Turner, of investment bank Deutsche Numis, said: “Including 3i skews things quite a lot. It’s done tremendously well.”

The trust, which has a market value of over ￡20bn, is up 73pc since the start of this year owing to the strong performance of Action, a Dutch discount retailer and by far the trust’s biggest holding, accounting for 65pc of its portfolio.

In the nine months to Oct 1, 2023 (“P9”), the retailer generated net sales of €7.9bn, up from €6.1bn in the same period last year.

Jason Hollands, of stockbroker Bestinvest, said: “At a time when people’s pockets have been squeezed by high inflation, [Action] has hit a sweet spot for growth and clearly been a highly successful investment for 3i Group.”

However, just because 3i’s performance has skewed the figures, that is not to say that other private equity firms have done terribly.