Professionals put a sleepy sector back on the map

INVESTMENT TRUSTS

BY JONATHAN DAVIS

There have been few more remarkable phenomena in the investment world than the startling revival of the investment trust as a vehicle for channelling both retail and institutional funds into UK and global stock markets.

As recently as 1980, the sector seemed to be "clutching its death warrant", says Robin Angus, of NatWest Securities, one of the few analysts to have followed the sector consistently since those days of relative oblivion, and still one of the most respected.

As well as trading at a substantial discount to their net asset values, many of those trusts that did exist were sleepy institutions whose methods today would be considered amateurish. The investment trust world was a cosy one that few outsiders knew much about.

Yet today things could not be more different. Not only has the number of trusts mushroomed, but they have become increasingly sophisticated. An increasing number are run by professional fund management groups, rather than by groups of individuals. Investment trusts account for 36 of the companies in the Footsie 350 index.

All this, concludes NatWest in a lengthy review of the sector published last week, has been mostly for the good. Investment trusts will continue to offer attractive homes for both retail and institutional funds.

The trend towards increasingly specialist trusts is also certain to continue. With a handful of exceptions, the day of the general trust, such as the long standing ones run by Foreign & Colonial and Alliance Trust, is over.

Nevertheless, not all is necessarily unalloyed good news in the sector, Mr Angus reckons. These days, the marketing people have the whip hand in the sector, the industry is increasingly production-oriented and "if it sells, it's good".

He worries whether this will lead to erosion in the standards of integrity shown by the sector. Reputations that have taken years to build could be threatened by corner-cutting and special deals.

For the retail investor, the worries include the increasing complexity of the capital structures now being created for trusts, and the very different risk characteristics that the sector now offers.

"I dread the idea that retail investors who think they are investing in a low-risk type of equity investment might get their fingers burnt through investing in the wrong trusts for them," says Mr Angus. He wants the industry to press ahead with the development and publication of risk ratings for trusts.

At the same time there is a need to educate independent financial advisers (IFAs) about what the trusts can and cannot do. "The key to the big-time in the retail investment world is to get the IFAs on one's side." While IFAs are increasingly interested in and knowledgeable about investment trusts, it is important they understand them properly before selling them to clients.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
PROMOTED VIDEO
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
Sport
footballBrighton vs Arsenal match report
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Recruitment Genius: Outbound Sales Executive - OTE £25,000

    £16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

    £45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

    Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Day In a Page

    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project
    Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

    Diana Krall interview

    The jazz singer on being friends with Elton John, outer space and skiing in Dubai
    Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

    Pinstriped for action

    A glimpse of what the very rich man will be wearing this winter
    Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

    Russell T Davies & Ben Cook: How we met

    'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
    Bill Granger recipes: Our chef serves up his favourite Japanese dishes

    Bill Granger's Japanese recipes

    Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
    Michael Calvin: How we need more Eric Cantonas to knock some sense into us

    Michael Calvin's Last Word

    How we need more Eric Cantonas to knock some sense into us