We have seen a spate of expert opinions and survey results, including one conducted by the Association of Investment Companies, lately predicting a rise in the use of investment trusts among advisers.
The ban on commission has removed the bias towards open-ended funds and the demand placed on firms which wish to remain independent means advisers need to consider investment trusts. But I think advisers will continue to shun closed-ended offerings.
While trusts are available on some platforms, the big three – FundsNetwork, Skandia and Cofunds – are no closer to offering them. In time they will, but by then trusts will be playing catch up in getting advisers’ attention.
First there is the issue of inertia. Advisers have historically favoured unit trusts and open-ended investment companies (Oeics). For all the right or wrong reasons, they are likely to stick to what they know and will take a toe-in-the-water approach at best.
Also, while trusts are available on some platforms, the big three – FundsNetwork, Skandia and Cofunds – are no closer to offering them. In time they will, but by then trusts will be playing catch up in getting advisers’ attention.
Also, open-ended funds are now offering clean, commission-free share classes at under 1 per cent per year where as only about 15 per cent of all investment trusts have a total expense ratio of 1 per cent or less.
Unless an adviser is looking for exposure to a specific asset class or a manager is not available via open-ended funds, why will they choose trusts over Oeics?
Abraham Okusanya is the Principal of FinalytiQ
