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Investing in Investment Trusts

    Investing in Investment Trusts


    Recently there have been a number of developments that may help these closed-ended vehicles gain the same level of exposure as their open-ended counterparts.

    In 2015 the Association of Investment Companies (AIC) reported a significant jump in the number of adviser purchases of trusts in the first nine months of the year. So far in 2016 the organisation adds it has seen continued demand from the adviser community for its training sessions.

    Alex Denny, associate director of investment trusts at Fidelity, notes: “This year may be the year that trusts really start to gain traction with financial advisers. Interest has been growing in the sector since the RDR in 2012, but supply-side dynamics have prevented many advisers from using trusts because they could not use their preferred [product] across multiple platforms.

    “With FundsNetwork adding trusts in December 2015 and Old Mutual having announced its intention to follow suit, the tide has now turned.”

    QuotedData research director James Carthew adds: “It’s very healthy seeing more platforms like Fidelity and Old Mutual offering better accessibility and facilities for buying trusts as they recognise the potential of the industry. This is likely to help push up adviser take-up of trusts.”

    Mr Carthew sees the use of trusts “creeping up”, but notes that one obstacle to any significant growth in their use has been advisers outsourcing investment decisions to networks that have not yet adopted the products.

    Also of note in the industry was the launch of the AIC’s Flexible Investment sector in January. Director of communications Annabel Brodie-Smith says the new category will help advisers easily compare those trusts investing in a range of assets.

    She explains: “It will also be really helpful for investors who want to compare these types of investment companies with similar open-ended firms. The Flexible Investment sector is a diverse sector where each investment company has a different style and strategy.

    “Some companies have a capital preservation strategy, while others have a multi-asset investment approach; some target specialist funds and others invest in closed-ended vehicles.”

    Mr Carthew observes the category does align trusts with open-ended funds.

    “The launch of the new sector also reflects the changing nature of the audience, with advisers and investors looking for off-the-shelf products that provide access to diversified returns from investing globally and across different asset classes,” he notes.

    But is it a useful grouping for investors to be able to compare the performance of different strategies?

    “Within the Flexible Investment sector, while the trusts may be using different strategies, their multi-asset nature does allow comparison,” Mr Carthew adds.

    “Financial advisers will look under the bonnet to evaluate each trust and ascertain which funds are really competing with each other.”

    Ellie Duncan is deputy features editor at Investment Adviser

    In this special report


    Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

    1. The London Stock Exchange (LSE) has made changes to the Aim Rules for Companies and Note for Investing Companies. One of the changes involved an investing company raising at least how much in cash?

    2. Access to investment trusts on some platforms remains limited, with Stephen Peters suggesting how many of the biggest trusts should be made available on all platforms in order to satisfy demand?

    3. According to Annabelle Brodie-Smith, which was the most popular alternative asset class for new launchs in 2015, with six new companies?

    4. In what month did the AIC launch the Flexible Investment sector?

    5. In 2015, the healthcare royalty monetisation market experienced its second strongest year on record with approximately what level of transactions?

    6. The London Stock Exchange has consulted on proposed amendments designed to make the admission and disclosure standards easier to use for listing invesment companies. One proposed amendments include renaming the Specialist Fund Market as what?

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