Inflows to investment trusts hit record £1.3bn

Inflows to investment trusts hit record £1.3bn

Advisers plugged a record amount of £1.3bn into investment companies last year, in a sign that their historic mistrust of the vehicles is softening.

The level of investment seen through adviser platforms increased by 23 per cent year on year, according to the Association of Investment Companies.  

Net demand for investment companies, which is purchases minus sales, was £320mn in 2021, an increase of 29 per cent on the previous year.

Investment trusts have not seen negative quarterly net investment since records began in 2011.

The data was compiled by ISS Financial Clarity for the AIC.

The number of companies buying investment trusts also rose, with an average of 2,028 in 2021 compared with 1,516 in 2020.

The most popular sectors in 2021, according to the AIC, were global (17 per cent), flexible investment (8 per cent), infrastructure (6 per cent), UK equity income (6 per cent), global smaller companies (4 per cent) and UK smaller companies (4 per cent).

Transact accounted for 45 per cent of purchases in 2021, followed by Raymond James, FundsNetwork, Ascentric, 7IM and Quilter Wealth Solutions.

Altogether, these six platforms account for 93 per cent of investment trust purchases.

Nick Britton, head of intermediary communications at the AIC said: “Advisers are clearly seeing many benefits in the investment company structure, whether it’s for core global equity exposure, consistent income or access to property and infrastructure.”

He said the flexible investment sector, which is home to investment companies focused on multi-asset investing and capital preservation, saw particularly strong demand in a year that was marked by continuing uncertainty over the Covid-19 pandemic. 

“It’s encouraging that venture capital trusts featured among the top sectors by net demand in the final quarter of the year, indicating growing interest in trading VCT shares on platforms.”

Advisers have historically favoured open-ended funds over their closed-end investment company counterparts.

A survey published by the AIC in 2020 showed that there were six main obstacles touted by advisers as their reasons for avoiding trusts.

Issues with platforms and a lack of contact with asset managers were two of the main finds, while other issues included a lack of knowledge, a level of inertia among IFAs, research constraints and some firm and network-wide policies which restricted the use of trusts.

But advisers’ use of the vehicles has risen since the Woodford Equity Income Fund scandal and closure of many open-ended property funds during the pandemic led to the “love affair” with unit trusts being eroded.