The board of the £1.5bn City of London investment trust has urged its own shareholders to treat the Key investor document (Kid) it has produced with “caution.”
Under Mifid II regulations, investment trusts are required to produce a two page document outlining all the important features of the investment, which includes projections of future performance.
As FTAdviser has previously reported, this requirement has provoked considerable disquiet in the industry, with Simon Fraser, who chairs the £4bn Foreign and Colonial trust calling the requirements “a potential mis-selling scandal.”
Following the criticism the Financial Conduct Authority (FCA) then said firms could include additional material.
However concerns remain.
In the half year report of the City of London trust, which covers the six months to 31 December 2017, its chairman, Philip Remnant wrote that its Kid document is “based on prescribed guidelines with almost no room for deviation".
"The projected returns are derived from past performance and in the view of the Board should be treated with caution.
"The measure of risk is calculated according to the historic volatility of weekly returns and in our view is not likely to match the perception or meaning of risk for most private investors.”
The trust has increased its dividend for each of the past 51 years. For the six months to 31 December, the trust returned 5.74 per cent, compared with 4 per cent for the average trust in the AIC UK Equity Income sector in the same time period.
The trust is run by Job Curtis at Janus Henderson.
David.Thorpe@ft.com
