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Guide to investment trusts

Published by FTAdviser | Feb 22, 2012

To retain the “independent” tag post 2012, advisers will have to look at all investment options available to their clients that may be suitable for them.

This updated guide explains investment trusts, their pros and cons and how to invest in such schemes.

Answers supplied by the Association of Investment Companies, Lipper and Oriel Securities.

  1. Q: What is an investment trust?

    Investment trust companies invest in a diversified portfolio of assets. The investment trust is managed.

  2. Q: What are the pros and cons of investment trusts?

    Liquidity is often cited as a reason not to opt for investment trusts.

  3. Q: How are investment trust companies managed?

    The raison d’etre of an investment company is ultimately the same as a unit trust/Oeic – to spread risk by investing in a variety of companies on...

  4. Q: How do ITs differ from Oeics and unit trusts?

    Because of the stock exchange listing, investment companies are ‘closed-ended’, meaning that for every buyer, there also needs to be a seller.

  5. Q: How does the pricing structure work?

    Discounts and premiums are a feature that sets investment trusts apart from the open-ended sector, where the price is the same as the value of the...

  6. Q: What is gearing?

    Gearing (or borrowing) is another key feature of the investment company sector that sets it apart from open-ended funds.

  7. Q: How can I research/invest in investment trusts?

    For advisers looking to find out more about investment companies the AIC’s website, www.theaic.co.uk is a good place to start.

  8. Q: What is a VCT?

    Venture capital trusts typically invest in unquoted shares including new shares of privately owned companies, and new shares of companies traded on...

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