This year, however, traditional asset classes have played a larger role. Property and infrastructure’s share of new issuance fell to 41 per cent, while equities’ share spiked to 36 per cent. Baillie Gifford has launched a US equity trust, Asset Value Investors has debuted a Japanese value equity strategy, and Terry Smith’s £823m Smithson Investment Trust broke Neil Woodford’s record for the largest investment company fundraising.
Mr Britton and others believe adviser engagement will remain strong despite 2018’s issuance moving away from illiquid assets. Table 3 shows where intermediaries put their money in the first nine months of the year.
Table 3: Adviser purchases by sector, Q1-Q3 2018
UK Equity Income
Property Direct – UK
Global Emerging Markets
Asia Pacific ex Japan
UK All Companies
Source: AIC. Copyright: Money Management
Pascal Dowling, director at Kepler Trust Intelligence, says the fact that sales have remained healthy despite lower issuance from illiquid asset funds shows the increased appeal of investment trusts among the adviser community.
“Advisers who understand the benefits of investment trusts will be pleased to see straight equity portfolios from the teams that have come to market – all of whom have strong reputations – and much of the demand for these trusts will come direct from the end-investor anyway,” Mr Dowling says.
James Budden, director of retail distribution at Baillie Gifford, says adviser interest was initially limited when it first marketed the new US Growth Trust. But since its initial public offering in early 2018, advisers have picked up around 10 per cent of the share register – although this is still overshadowed by the 60 per cent wealth management share and 20 per cent from DIY investors.
He says: “Since RDR there has been more interest from advisers in our trust range. But despite levelling the playing field by removing commission, RDR did not invoke a steep rise in interest. Platforms such as Aegon/Cofunds and Quilter/Old Mutual still don’t list investment trusts and including them in model portfolios, which need regular rebalancing, has proved difficult to manage.”
Mr Budden touches on what many believe to be the biggest factors in limiting adviser interest in investment trusts. Aegon and Quilter both intend to include trusts on their platforms in the future, but some say the industry is designed to favour open-ended funds and so trust take up will never really flourish.
Earlier this year, a report from the Lang Cat consultancy, commissioned by the AIC, looked at the reasons why advisers have held back from investing in trusts. Platform access was one of the main issues, with a “structural” bias particularly prevalent in the advised space.
Advised platforms tend to focus on charging a percentage-based fee with no limit, in contrast to DIY platforms, which have a broader range of fee models. Generally speaking, it is more expensive to hold trusts on advised platforms than it is on DIY facilities.