InvestmentsFeb 20 2023

Adviser investment trust purchases rise

Search sponsored by
Adviser investment trust purchases rise
Advisers bought more investment trusts in 2022, according to the AIC (Pexels/Tima Miroshnichenko)

The demand for investment trusts on adviser platforms grew in 2022, despite a wider decline in product purchases.

The value of  the investment trust shares bought rose 1 per cent to £1.31bn last year, according to data from the Association of Investment Companies and compiled by ISS Financial Clarity.

The most popular sector, accounting for 16 per cent of trust share purchases, was the Flexible Investment sector, followed by UK Smaller Companies and the Global sector.

The average discount in the investment trust sector, which is the gap between the trust’s net asset value and its share price, widened from 8 per cent to 11 per cent in the year.

A big discount to net asset value implies investors do not think the present value of the trust’s holdings will be maintained in future.

Tough markets will always hit share prices and deepen discountsNick Britton, AIC

Discounts to investment trusts have narrowed over the past few years as demand among retail inventors rose, particularly for growth strategies, with many believing this trend would continue.

However, the cyclical market movement away from growth stocks, much of which was driving the demand for trusts in the past year, led to discounts widening.

Resilient sales

The rise in trust sales came amid a backdrop of product popularity on adviser platforms, with overall purchases in 2022 falling 7 per cent to £183.8bn.

This is the biggest year-on-year fall since the AIC’s records began in 2011.

Global markets suffered turbulence last year as high inflation, rising interest rates and geopolitical uncertainty worried investors.

Some $30tn (£24.9bn) was wiped off the value of global stock and bond markets last year, according to the FT.

Head of intermediary communications at the AIC, Nick Britton, said the widening of discounts in investment trusts in 2022 does not appear to have dampened demand from advisers and wealth managers.

“The jump in popularity of the UK Smaller Companies sector suggests that the deeper discounts on offer may have attracted some bargain hunters,” he said.

“Tough markets will always hit share prices and deepen discounts, but advisers are clearly looking beyond that to the strong long-term record of many investment companies and their ability to bounce back when markets recover.”

Investment trusts whose discounts widened the most in 2022 include the Augmentum Fintech trust, the Chelverton Growth Trust and the RTW Venture trust.