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
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Research Associate / Asset Management Research Analyst

    £40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...

    The Green Recruitment Company: Graduate Energy Analyst

    £20000 Per Annum: The Green Recruitment Company: Summary: The Green Recruitm...

    Ashdown Group: Finance Accountant - Financial Services - Central London

    £30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...

    Ashdown Group: Chief Technology Officer (CTO) - Glasgow

    £90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...

    Day In a Page

    Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

    Solved after 200 years

    The mysterious deaths of 3,000 soldiers from Napoleon's army
    Every regional power has betrayed the Kurds so Turkish bombing is no surprise

    Robert Fisk on the Turkey conflict

    Every regional power has betrayed the Kurds so Turkish bombing is no surprise
    Investigation into wreck of unidentified submarine found off the coast of Sweden

    Sunken sub

    Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
    Instagram and Facebook have 'totally changed' the way people buy clothes

    Age of the selfie

    Instagram and Facebook have 'totally changed' the way people buy clothes
    Not so square: How BBC's Bloomsbury saga is sexing up the period drama

    Not so square

    How Virginia Woolf saga is sexing up the BBC period drama
    Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

    Still carrying the torch

    The seven teenagers given our Olympic hopes
    The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

    The West likes to think that 'civilisation' will defeat Isis...

    ...but history suggests otherwise
    The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

    The bald truth

    How thinning hair made me a Wayne Rooney sympathiser
    Froome wins second Tour de France after triumphant ride into Paris with Team Sky

    Tour de France 2015

    Froome rides into Paris to win historic second Tour
    Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

    A new beginning for supersonic flight?

    Concorde's successors are in the works 15 years on from the Paris crash
    I would never quit Labour, says Liz Kendall

    I would never quit party, says Liz Kendall

    Latest on the Labour leadership contest
    Froome seals second Tour de France victory

    Never mind Pinot, it’s bubbly for Froome

    Second Tour de France victory all but sealed
    Oh really? How the 'lowest form of wit' makes people brighter and more creative

    The uses of sarcasm

    'Lowest form of wit' actually makes people brighter and more creative
    A magazine editor with no vanity, and lots of flair

    No vanity, but lots of flair

    A tribute to the magazine editor Ingrid Sischy
    Foraging: How the British rediscovered their taste for chasing after wild food

    In praise of foraging

    How the British rediscovered their taste for wild food