Investment trusts’ gearing abilities make them ‘clear winner’ – FT Adviser

FT Adviser Article

Great FT Adviser article by Sally Hickey on the outperformance of investment trusts vs open-ended funds in many sectors over the long term.

As Nick Britton ACSI points out, it’s not just the gearing that makes the difference over the long term. The closed-ended structure allows managers of investment trusts to take a long-term view of their assets as they are not subject to the same relentless flow of monies, both being introduced and withdrawn, as are open-ended funds. Investing for the long-term tends to result in better returns.

Being closed-ended, investment trusts are also better suited for certain types of investment – particularly those less-liquid such as commercial property, as highlighted by the closure of a number of open-ended property funds during the pandemic and following the EU Referendum.

Other less-liquid assets such as private equity or smaller companies require a similar approach. Their very nature, and therefore at times illiquidity, require the incubator effect best offered by the closed-ended structure of investment trusts.

“This data illustrates loud and clear that investors should keep an open mind, and they don’t have to choose between funds and trusts – you can have a mix of both.” – Dzmitry Lipski of Interactive Investor

Despite the above, 85% of advisers don’t currently use investment trusts?!

The reasons cited within the article for advisers avoiding their use are outdated and overcome through proper due diligence.

Please get in contact if you would like to discuss our genuinely differentiated specialist investment trust outsourced DFM solution.

Return to News