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Has the dawn of the Investment Trust finally arrived?

13/11/2013

For as long as I have worked in the investment world I have heard how fantastic investment trusts are and how they are often ignored or misunderstood, or simply didn’t pay a commission to advisers. Whatever the reasoning investment trusts have never really made the main stream, but could this be changing? Have the stars finally aligned to allow these closed ended cousins of the more commonly spotted OEICs their time in the spot light?

I actually think a tipping point may have been reached. The stars I refer to include the much discussed and much maligned RDR. For an adviser to remain “independent” they must consider all options that could be suitable for their clients and also perhaps given the fact that now more advisers are working on fees not commission the playing field has perhaps levelled off.

Behind the regulatory change, the trade press appears to have aided the cause for investment trusts. Through our press monitoring insight tool, the RiF Tracker, we can see that during September 2013 the sector that received the most positive press from the trade magazines was, yes you have guessed it, the investment trust sector. Not only that and, perhaps even more significant, is the fact that the sector had the most coverage overall, knocking the UK All Companies and UK Equity Income sectors off their perch as most talked about sectors.

The increased availability via the preferred buying point for advisers, the platforms, is perhaps the most significant factor. Figures in the first half of 2013 would appear to confirm this assumption. Sales of investment trusts, via platforms increased by around 50% in that period, compared with the same period in 2012 according to the AIC (Association of Investment Companies) whose data feed comes from six platforms, including Transact and Ascentric, of which  account for 90% of the sales of investment trusts throughout 2012.

Many advisers have signed up for “training” on the products highlighting that until now they have been off their radar. Advisers still in the game now are a new breed working in a new world or advisers that have long held many of the beliefs now more the norm. This increased demand for knowledge indicates that there is a desire to learn and to offer the best products for their clients. A noble quest and one that was long overdue to grant those true “professionals” with their clients’ interests at heart the kudos they deserve.

With the news of Neil Woodford’s imminent departure from Invesco Perpetual it is obvious that one of the real advantages of the closed end strategy is the stability of the asset base. Investment trusts don’t have to contend with continual asset inflows and outflows, the share price is fixed by the market freeing the manager to pursue a strategy without fear of enforced sales of holdings if investors choose to cash out.

That news I mention of Woodford’s career move will probably move investment trusts off the front pages over the coming weeks, but as that story resolves itself I fancy a continual rise in investment trusts and more converting to the closed end strategy.

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