Investment Trusts – Alive and Kicking

Investment Trusts Alive and Kicking

Investment Trusts Alive and Kicking

An investment trust is a type of collective vehicle, investing in a portfolio of shares and securities. An investment trust works by pooling together investors' money and delegating responsibility to a professional fund manager to invest in the stocks and shares of a wide range of companies, supplemented by other securities.

This enables individuals with relatively small amounts of money to gain exposure to a diversified and expertly managed portfolio of investments.

The first Investment Trust, Foreign & Colonial, was launched in London in 1868 to invest in foreign government bonds or fixed interest stocks. Since then investment trusts have been involved in some of the most significant industrial trends and investment opportunities. As at 30 June 2009, there were over 430 investment trusts with 75 billion under management (Source: Association of Investment Companies).

In September 2009 the cash flowing into investment trusts was a mere 73.6 million; fast-forward to September 2010 and this figure is significantly more impressive at 1.88 billion (an increase of over 2500%).

The launch of Anthony Bolton's Fidelity China Special Situations as a closed-end fund alone raised 460m in April this year. Even when we take this out of the equation, that still leaves another 1.4 billion that has been invested in the sector in the last 12 months.

This highlights the sector is very much alive and kicking and seeing a well-deserved resurgence of interest.

Importantly, investment trusts don't pay commission and therefore the commission hungry adviser, which still accounts for a good 50% of the market, is unlikely to recommend such an investment. But, as advisers are forced to move to a fee basis for their remuneration by 2012, something Ward Goodman Financial Services have offered for some years now, this sector is more likely to be opened up to the wider investor market.

Ward Goodman Financial Services have been, where appropriate, recommending Investment Trusts as part of a balanced portfolio for a number of years and will continue to do so. It is important to remember that past performance is no guarantee to future performance but the performance of Investment Trusts has in a number of areas been better than the Unit Trust/Open Ended Investment Company equivalent.

For more information contact Gareth Simon, Ward Goodman's Financial Services Manager on 01202 875900

This document does not constitute specific financial advice and only provides our company views.

Before taking any action you should seek advice from an appropriately qualified financial adviser

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