New investment trust listings have slowed down, admitted Ian Sayers, chief executive at the Association of Investment Companies (AIC), but he pointed out fundraising in the sector has changed.
Speaking to FTAdviser, Mr Sayers attributed the slowdown in investment trust launches in the first quarter of 2017 to the number of elections the UK has had to contend with recently and not to a loss of appetite among investors.
He explained: “I think really it’s the way fundraising is happening that’s changed quite a bit.
“If you go over the last three or four years new fund launches have averaged about £2bn a year, that’s been fairly consistent. As I say this year it’s been a little bit slower but it may pick up after the election.”
He added: “The real change is if you take existing funds raising new shares which always used to be in the minority if you went back a decade ago, that’s now in the majority and that’s been running at about £3bn to £4bn.”
He acknowledged high profile investment trust launches, such as Neil Woodford’s Patient Capital Trust which was unveiled in 2015, captured investors’ attention but added it was the rapid growth in existing funds which had boosted investment trust assets to record levels.
Asked whether with their ability to generate a steady stream of income, investment trusts could become a core part of retirement portfolios, Mr Sayers said he expected to see a “massive change”.
“Now we face the very realistic prospect that you might be in retirement for 30 or 40 years and with annuities yielding what they are, I think people are very concerned about that,” he suggested.
“There’s no doubt we’ve seen our industry react – a lot more of our members paying dividends much more frequently.”
Research conducted by the AIC on what people want from a pension pot post-retirement found there are a lot of people that want just a high level of income but he said the “holy grail” was for income to grow above inflation.
“We’ve produced research on the UK Equity Income sector which shows that over 20 years our dividends have increased year in, year out, way above inflation and about 2 per cent above RPI on average every year,” he said.
“And also it’s doubled your capital as well and, of course, unlike an annuity you still have that capital to hand down to your children if you want to after you die.”
The AIC has been educating advisers on the investment trust structure by running roadshows across the country.
But he pointed out the aftermath of the European Union referendum last June, when open-ended property funds had to close to halt redemptions “brought home to a lot of advisers was the true value of having a closed-ended structure”.
“I think that’s alerted financial advisers to the fact there is real value in the closed-ended structure, particularly in illiquid asset classes, like commercial property,” he added.
