Investment Trusts  

Adviser purchases of investment trusts hits highest level

Adviser purchases of investment trusts hits highest level
 

Purchases of investment trusts on adviser platforms hit their highest level in the first six months of the year, which an expert said showed the long-term perspective of advisers and wealth managers.

Some £700mn of investment trusts were bought between January and June this year, according to data from the Association of Investment Companies and ISS Financial Clarity.

The period between April and June saw £361mn in investment trust purchases, which is 20 per cent higher than the same period last year, and the second-highest quarterly period on record.

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This defied the wider trend in total adviser platform purchases, which dropped 5 per cent in Q2 to £48.9bn.

Head of intermediary communications at the AIC, Nick Britton, said historically, market downturns have been a great time to buy investment companies.

“The healthy level of demand for investment companies during some difficult months in the market shows that advisers and wealth managers are taking a long-term perspective,” he said.

Data shows that investment trusts’ ability to gear has led to the sector outperforming its open-ended counterpart.

Over the past 20 years, the AIC global investment trust sector has returned 440 per cent on average, compared with the IA Global’s 329 per cent, according to Interactive Investor.

The ability of investment trusts to borrow money to enhance their returns has long been considered a reason for investment trusts outperforming open-ended funds in periods of rising markets.

The flexible investment sector was the most popular in the second quarter of the year, representing 17 per cent of purchases.

The global sector, which had held the top spot for the past five years, was the second most popular in the period, accounting for 13 per cent.

UK smaller companies was third (7 per cent), followed by UK commercial property (6 per cent), UK equity income and infrastructure (both 5 per cent).

“It’s noteworthy that the flexible investment sector proved so popular last quarter," Britton said.

"This sector contains investment companies that can invest in a range of assets, including a few well known ‘capital preservation’ mandates.

"It doesn’t take too much imagination to guess why these might have been popular this year.

“On the other hand, a strong showing for sectors trading on wider-than-usual discounts, such as UK Smaller Companies, suggests that some buyers may have been shopping for bargains.”

sally.hickey@ft.com