Investment trusts rising from the dead as the cash floods in
Sunday 23 December 2012
Investors are showing a renewed interest in investment trusts, according to some of the UK's major independent financial advice firms.
Winterflood securities says that the amount of money flowing into investment trusts, which are in effect listed companies which hold shares in other firms, has increased by 30 per cent in the past year.
In addition, a host of investment trust funds have launched during the year including the Battle Against Cancer Investment Trust and the large Starwood European Real Estate Fund, which attracted nearly £230m of new investor cash.
The Association of Investment Companies, which is the umbrella organisation for investment trusts, said that the sector had a bumper 2012: "While the environment for fundraising remains challenging, 2012 has been a better year than 2011," a spokesperson said. The renewed optimism enveloping investment trusts is somewhat surprising as during the financial crisis many commentators were writing the obituary of the investment vehicle.
"Many of the big funds in the sector are now trading at a premium (where the value of the investment trust's shares is greater than the assets it holds) whereas in the past they were at a large discount reflecting better market conditions and investor interest in the sector," Mark Dampier, investment director at FTSE 100 financial advice firm Hargreaves Lansdown, said.
But Mr Dampier added there were still problems to overcome for the sector: "You have to be careful which ones you select because there are some woeful trusts out there with liquidity issues. The soundest advice is to look at the best fund and manager regardless of whether it is an investment or a unit trust," Mr Dampier concluded.
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