RDR will boost investment trust funds: Unicorn

Mr Walls, who manages the £5m Unicorn Mastertrust fund of investment trusts, said that with the retail distribution review coming up, multi-manager funds investing in investment trusts could be useful to IFAs who want exposure to the sector but do not have the expertise to do it themselves.

He said: “Investment trusts have outperformed in most sectors in the long term against open-ended competitors, partly because they have lower charging structure and total expense ratios.

“Also they are structurally robust. Many unit trusts and open-ended investment companies fail for years and people seem to be locked into them. That is not the case for investment trusts because they have boards of directors and shareholders who apply pressure to change things if things do not go well. They deserve to get a better audience among the IFA community.”

The Unicorn Mastertrust fund, launched in December 2001, is small but Mr Walls said he expected it to attract more investment from the IFA sector after RDR.

Mr Walls said: “The fund is having a hard time getting through various barriers in terms of building its size, but this will change after RDR because more IFAs will think seriously about whether they should be advising on investment trusts alongside Oeics and unit trusts.”

Since launch the fund has delivered 99.4 per cent growth, with 65.9 per cent in the past three years, significantly outperforming the sector average and FTSE All Share Index.

Although short-term performance has not been so good in the past 12 months, Mr Walls said he does not get “hung up” on short-term performance because in rising markets these types of fund tend to do better than the active managed sector.

He said: “Last year was not the greatest year for funds like mine but in time it is possible to add value by selecting the right investment trust.”

Portfolio turnover is fairly low, at less than 50 per cent a year, and Mr Walls diversifies the fund by choosing a range of investment trusts that are broadly 35 per cent to 45 per cent UK with a balance of overseas markets.

In the near term, he plans to add more risk by increasing exposure to emerging markets and smaller UK companies.

Mr Walls added: “I am always looking for interesting situations where I can get decent discounts and good quality management.”

Steve Hennessy, IFA for Buckinghamshire-based Myers Davison Ginger, said: “RDR will ensure investment trusts get an equal seat at the table and they will be a key element of any financial plan.”