Investment trusts are “hard to explain”, said advisers who were asked what the main reason was for not recommending them to clients.
According to the latest FTAdviser Talking Point poll, which asked advisers for their main objections to using investment trusts, 40 per cent reasoned they were difficult to explain to clients.
But John Dance, chief executive at discretionary fund manager Vertem Asset Management, said that was "a bit of a lazy reason".
"There are certainly more complex products out there than an investment trust," he added.
Mr Dance explained: "We use them sparingly. We use them for illiquid or less liquid asset classes. Where we've found them as being the best vehicle for asset classes is typically things like infrastructure."
He explained: "If they [less liquid asset classes] are owned in an open-ended fund, if you get a big redemption, they’re not exactly positions that are easily unwound. So to have them in a closed-ended vehicle obviously means the manager can concentrate on managing the portfolio."
In response to the poll on Twitter, Claire Markham, a chartered financial planner at FH Manning Financial Services, said she also used investment trusts in client portfolios “for more illiquid asset classes”.
The poll results showed 28 per cent also cited availability on platforms as they reason they did not invest in investment trusts, closely followed by 27 per cent who said they preferred open-ended funds.
David Bebb, chartered financial planner at Upfront Financial Services, said he was reluctant to use investment trusts over Oeic equivalents in client portfolios due to the additional trading costs incurred.
"Oeics/unit trusts can often be bought and sold with no initial charge via an investment platform," he noted.
"Investment trusts typically incur dealing charges, which is unhelpful, particularly if the client is making regular contributions, or the client is in the decumulation stage and needs to 'sell-down' from their investment on a regular basis."
Investment trusts are now more widely available on platforms, with only two platforms yet to add them – Cofunds and Old Mutual.
Mr Dance agreed availability of closed-ended funds on platforms was one of the reasons advisers did not use them so often.
"They’re more of a staple within many DFM portfolios and a lot of our peer group are quite happy using them," he acknowledged.
"But access to them for advisers has been very difficult. The consolidated trading process that platforms have typically used has made it difficult for them to offer them to advisers.
"We access a few platforms to manage model portfolios for IFAs and that side of the market is definitely opening up and now becoming more available on a number of platforms."
While some financial advisers have remained hesitant about the investment trust structure, the Association of Investment Companies (AIC) reported purchases of investment trusts by advisers and wealth managers reached a record £990m in 2017.
It revealed in a press release last month that this figure was up 46 per cent on £679m in 2016 and 41 per cent higher than the previous record of £704m in 2015.
Ian Sayers, chief executive of the AIC, explained: “Advisers are recommending investment companies due to their strong long-term performance and dividend record, innovation through new asset classes and the durability of the investment company structure.”
Rebecca O’Keeffe, head of investments at Interactive Investor, said: “Overall, where investment trusts exist in parallel with an open-ended fund it is essential that investors check the performance of both to see which one has the better track record.
“Investors who consider themselves to be purely ‘fund investors’ may be missing a trick by not expanding their horizons and looking at the range of available investment trust options, but equally investment trust fans should also keep their options open too.”
Only 5 per cent of those who voted in the poll claimed the split-cap crisis, which was investigated by the financial services regulator in 2002, was the reason they do not recommend closed-ended funds to clients.
eleanor.duncan@ft.com
