The implementation of the Retail Distribution Review has brought a greater focus on investment trusts. Advisers wishing to call themselves ‘independent’ have to prove their consideration of all fund types for their clients, bringing investment trusts somewhat back into fashion. Equally, investment trusts have had to do their part to maximise the potential of RDR, upping their game to ensure they’re on a level playing field with their open-end peers, and in particular, this has meant better disclosure.
In May 2012, Morningstar called for greater transparency from closed-end funds. Historically, closed-end funds have disclosed their full holdings to shareholders just once a year, and in some cases not even with a full list but with a truncated version that showed only the largest positions by percentage of assets. This practice was always uncomfortable for us, as it goes against our core belief that investors have the right to know where their money is being invested. Fortunately, we are now seeing change.
In the first quarter of 2013, three of the largest global equity investment trusts started to disclose their full holdings on a monthly basis. Alliance Trust (ATST), Murray International (MYI) and Witan Investment Trust (WTAN) are some of the oldest investment trusts and they have a very broad shareholder base, not least because of their respective savings plans. Combined, these three funds account for £5.3 billion in assets. That’s a lot of shareholders who are now better informed about their investments.
This means that four of the five largest global equity investment trusts are now disclosing their full holdings to shareholders on a monthly basis, thus putting them on a par with their open-end counterparts. As a result, peer comparison is far easier and more accurate as investors can look through to the underlying holdings on a regular basis and ensure their portfolios are positioned in the right way to meet their needs. In the cases of Murray International—run by Aberdeen—and Witan, this is a jump from quarterly disclosure to monthly. For Alliance Trust, it’s a new approach and follows the reshaping of the portfolio under Ilario Di Bon.
Prior to Di Bon’s arrival, the Alliance Trust fund comprised more than 400 individual stocks, only the top 50 of which were detailed in their annual report by percentage weighting. Granted, their website showed a full list of stock names but there was no detail on the allocation of assets in each, nor was there a breakdown of names in their underlying fund holdings. Alliance Trust’s move to publish full portfolio details on a monthly basis from hereon is a great leap forward for shareholders.
Also included in this group of five is F&C Investment Trust, at £2.6bn, which has been disclosing monthly holdings data to shareholders since the end of 2011. The fifth, Scottish Mortgage Trust, in the Baillie Gifford stable, is disclosing quarterly and has been since 2010—both were early advocates of better transparency.
These five funds – and their boards – are leading by example and we are delighted to see this increased openness with their investors; this should in turn lead to a better investing experience and a wider use of those funds embracing the benefits of transparency for shareholders.
In May 2013, we will be updating our Transparency paper and reporting on how things have progressed since its release, one year on. Meanwhile, we are delighted with the increased transparency already coming through, and we look forward to more investment trusts following the example being set by these global equity investment trust leaders.
This Morningstar article originally appeared in Investment Adviser.
