The number of advisers using investment trusts in portfolios remains low but is on the increase, according to Ewan Lovett-Turner, director of investment companies research at Numis Securities.
Speaking to FTAdviser’s Julia Faurschou, he said it is an area investment advisers should be looking at, particularly as investment trusts provide exposure to alternative asset classes.
“It’s offering something that isn’t available in an open ended format,” he explained.
Mr Lovett-Turner added: “The less liquid assets, such as infrastructure and property - as we’ve seen with the restriction on redemption in open-ended funds - aren’t actually really suited to daily liquidity vehicles.”
Following the UK’s vote in favour of exiting the European Union last June, many open-ended property funds suspended dealing after liquidity concerns in response to a wave of redemptions.
The likes of infrastructure funds, property and specialist debt are certainly areas people should have a look at. Ewan Lovett-TurnerHe said Numis Securities is working with platforms to widen the availability of investment trusts, which are still not available on some of the biggest platforms such as Cofunds.
“It’s getting the platforms engaged. But also getting advisers comfortable that these aren’t too high risk or complex,” Mr Lovett-Turner added.
He observed the investment trust sector was once dominated by equity funds but alternative and illiquid assets make up 50 per cent of the sector as a whole.
“Now over 80 per cent of [investment trust] issuance in the last three years has been in alternatives,” he pointed out.
“A lot of these are dependent on delivering steady income streams. So the likes of infrastructure funds, property and specialist debt are certainly areas people should have a look at.”
Mr Lovett-Turner cited the TwentyFour Select Monthly Income fund as an example. He added: "That offers investors a broad range of European debt exposure in a mixture of asset backed securities, high yield and some bank debt.
"All this generates an above average yield by investing in the less liquid end of the debt market. It gives people a cushion if rates do rise that they’ve got a decent yield to support that."
eleanor.duncan@ft.com
