Investment trusts continue to gain popularity among financial advisers. New research from the Association of Investment Companies (AIC) shows that purchases by advisers reached a record £990 million in 2017. This was 46 per cent up on 2016.
Prior to the Retail Distribution Review (RDR) in 2012 financial advisers largely avoided investment trusts. Some advisers labelled investment trusts as ‘too complex’ to explain to clients, due to the differences in the closed-ended structure versus open-ended investment funds.
Sceptics, however, point to the fact that investment trusts never paid commission as the main driver behind the sector being less popular than open-ended funds. When the RDR was introduced, commissions were banned.
Money Observer has long been in favour of investment trusts, due to their characteristics. One advantage of investment trusts is that they have a set number of shares. This means their share price can absorb fluctuations in supply and demand, rather than the fund manager having to sell assets when investor money flows out of the fund.
While some have feared that advisers might still shun investment trusts because they consider them to be more complicated, the AIC figures show that these fears are unfounded.
Ian Sayers, chief executive of the AIC, says: ‘Adviser purchases of investment companies have reached an all-time high and that’s excellent news as the industry celebrates its 150th year.’
He argues that advisers are recommending investment companies due to ‘their strong long-term performance and dividend record, innovation through new asset classes and the durability of the investment company structure.’
He adds: ‘It’s significant that four out of the six most popular sectors for advisers are in alternative assets generating attractive yields, and two of these sectors are property. Since the problems experienced by most open-ended property funds after the [EU] referendum, property investment companies have grown in popularity. Advisers are clearly recognising the suitability of the closed-ended investment company structure for illiquid assets.’
The most popular investment trusts sectors among advisers were: global (17 per cent), property direct UK (11 per cent), UK Equity Income (10 per cent), debt (7 per cent), infrastructure (6 per cent) and property specialist (6 per cent).
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