I’ve heard it said that investment trusts are antiquated and stuck in their ways but I’d argue the opposite. In many cases they are innovative and willing to adapt and change while other funds languish. This was the topic of a panel discussion chaired by journalist Cherry Reynard. As well as citing some well-known characteristics like revenue reserves to facilitate income-smoothing, the panel also discussed the increasing sources of income to build up those reserves and the change made by the HMRC to allow the distribution of capital gains as income—an approach adopted by some private equity investment trusts where income flow can be very lumpy and sporadic.
Annabel Brodie-Smith of the AIC cited infrastructure funds as another source of innovation in the sector. Given their long-term nature and capital commitments, the closed-end structure makes good sense and it also allows for a healthy income flow; hence these funds have been trading at a premium to their net asset value, as investors recognise that flow of income.
James Saunders-Watson of JPMorgan cited the use of continuation votes at funds like BlackRock Frontiers (BRFI), where shareholders have a ‘get-out’ option after five years, or regular tender offers instead of buybacks, which help to avoid the erosion of capital that can occur through share buybacks.
The issue of access on platforms was discussed and Hugo Thorman of Ascentric cited adviser charging as the brutal difference between platforms that do and don’t currently offer investment trusts—early adopters of the true wrap approach have been able to include stock market investments. The panel also agreed there was a need for innovation on the part of some platform providers, not least in how they show investment trusts, to make them more accessible.
To hear these views and more, listen to the webinar here.
