Investment trusts have been an unloved investment choice for many years. The perception of them as expensive, complicated and unsafe has often been cited by advisers in the past.
Investment trusts predate their open-ended equivalents by 60 years, but have struggled to gain popularity. Before the RDR, investment trusts did not pay advisers commission and were not readily available on platforms. But with the changes the new regulatory landscape has brought and with more platforms adding closed-ended funds to their capabilities, has investor sentiment changed?
Simon White, head of investment trusts at BlackRock, says “Demand has increased markedly in the past couple of years. The RDR has had a significant impact on fund buying patterns in the UK, and investment trusts will be major beneficiaries of these trends over time.”
Mr White also points towards the 2014 Budget where transformational changes to the rules governing defined contribution pensions and alterations to Isas were made. “These more recent steps should considerably boost interest in investment funds generally,” he predicts.
Simon Cordery, head of investor relations and business development of investment trusts at F&C Investments, says closed-ended funds’ lack of popularity is due to the fact they have historically been an unfamiliar area. “Investment trusts are riskier, certainly. I’m not going to deny that. But I don’t think the risks are as great as [people] think they are.”
He says the lack of use of investment trusts comes down to education and consumers becoming more familiar with them and understanding all of their “moving parts”. He adds, “I think it is simply down to the fact these people are very busy and having to look at a potentially unfamiliar area doesn’t feature prominently on their schedules.”
Unpopular choice
Our research looks into investment trust performance over the 12 months to 31 October 2014 to see which providers delivered the best returns. In June last year, Money Management did a similar piece of research looking into the world of open-ended fund groups and, in the first of its kind, this feature aims to look at investment trusts in the same vein. Similar to the unit trust research, the goal is to see how different groups of varying sizes perform across sectors.
