InvestmentsMay 30 2013

Investment trusts ‘markedly improve’ transparency

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ByEleanor Lawrie

Morningstar has praised the increased transparency by investment trusts a year after it said the sector needed to improve disclosure to investors.

The rating agency said in its update to the Investment Trusts: Why Transparency Matters paper that the transparency of the closed-ended universe had “improved markedly” in the past year following its initial report in May 2012.

In last year’s report, Morningstar criticised major trusts for their lack of transparency, hitting out at Alliance Trust for not disclosing the size of its equity holdings to shareholders, not disclosing non-equity holdings and for failing to show the size of its positions in Alliance Trust Investments funds.

However, an update by Morningstar shows 76 trusts are now disclosing full portfolios on a monthly basis, a three-fold increase compared to when the May 2012 report was written.

Among those, it said Alliance Trust had moved from non-disclosure of full holdings to monthly disclosure.

Other large players have also improved their reporting frequency, with Jeremy Tigue’s £2.7bn Foreign & Colonial moving from quarterly to monthly, £2.3bn Templeton Emerging Markets moving from annual to quarterly and Bruce Stout’s £1.5bn Murray International now discloses monthly instead of every six months.

Morningstar also said more than double the amount of trusts were making full quarterly disclosure compared to a year earlier, up from 29 to 65.

“The transparency of investment trust holdings has improved markedly in the past 12 months,” Jackie Beard, director of closed-end fund research at Morningstar said.

“Since issuing our initial report, we have seen a change in holdings disclosure policies at a number of large funds; our update issued today names four of the industry’s largest funds that have each moved to monthly holdings transparency during the course of the year.”

Ms Beard said the Retail Distribution Review had placed investment trusts on a more level playing field with their open-ended counterparts, as long as advisers could obtain up-to-date information they needed to invest.

“....for [closed-ended] funds to be truly comparable, and for them to be used with confidence, an investor and their adviser need to be able to see the underlying constituents of their investment funds on a regular and timely basis,” she said.

Ms Beard noted that trusts that were disclosing more frequently were receiving growing interest from “self-directed” investors.