Over the last 18 months we’ve worked hard on our Investment Trust coverage. We’ve enhanced the data that’s available to you. We’ve improved the tools with which you can analyse this data. We’ve written educational guides explaining the structural differences of investment trusts compared with open-end funds and extolled the benefits of the closed-end structure, through a mixture of articles, presentations and webinars. In January we launched our qualitative Morningstar Analyst Ratings for Closed-end Funds, giving you our independent, forward-looking opinion on some of these funds.
Our research and ratings are first and foremost a service to investors. Everything we do at Morningstar is underpinned by our belief that investors come first. We want to help you make better and more informed decisions about your investments. And to do this, we all need the right information.
This week, Morningstar called on the investment trust industry to improve transparency within its portfolios. For investment trusts to compete on a level-playing field with open-end funds, where full holdings are disclosed monthly, they need to be more transparent – plain and simple. It’s not enough to produce a list of holdings just once a year. By the time that information is made public, through the company’s annual report and accounts, it’s a few months out of date. Investors want to know where their money is being put to work. Advisers need to be able to monitor the risks to which their clients exposed. Only through a common classification system can advisers readily assess their clients’ portfolios and ensure their asset allocation and risk profiles remain appropriate.
We’re strong believers in the investment trust structure. Granted, it’s a little more complex than an open-end fund and factors such as discounts and gearing need to be understood. But that extra effort is worth making and, in the majority of cases where an asset manager offers similar open-end and closed-end funds, it’s the latter that has produced the better returns over the long term. For investment trusts to really benefit from the forthcoming regulatory changes, and shine through, they also need to help themselves and become more transparent.
You can read the full report here.
