Opinion  

Advisers are falling in love with investment trusts

Jeff Prestridge

Jeff Prestridge

Increasingly, trust boards are earning their fees by flexing their muscles on behalf of shareholders. When investment managers fail to deliver the shareholder returns expected of them, boards are wielding the axe and replacing them with new blood. They are also constantly demanding value for money from the managers, resulting in lower fees (in percentage terms) as a trust’s assets grow.

Of course, investment trusts are not without their fault-lines (occasional tame boards, some over-exuberant investment managers, and fees designed to over-reward the managers) or their particular complications (discounts and gearing).

And the split capital investment trust scandal of the late 1990s is a reminder that things can go horribly wrong when marketing is put before investment common sense.

So, let’s hope that under the new leadership of Richard Stone – former chief executive of Share plc – the AIC can keep impressing upon advisers the importance of embracing investment trusts within the portfolios they create for clients.

"Investment companies have a key role to play in enabling all investors to access a wide range of investments, including unquoted opportunities, in areas such as infrastructure and emerging biotech and green technologies," he said when being unveiled as the new AIC boss late last month.

"Investment companies have been delivering for investors for more than 150 years and today the industry continues to be a vibrant and growing one which has a lot to commend it to all types of investors."

Too right.

Advisers can find out more by visiting: https://www.theaic.co.uk/financial-advisers

Jeff Prestridge is personal finance editor of the Mail on Sunday