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Investment trusts share many of the properties of unit trusts or OEICs but have fixed share capital and their shares are quoted on the London Stock Exchange. Investment trusts are closed-ended, meaning that there is no new cash flowing into the fund or out of the fund.

Shares can be bought and sold in the same way as any other share and costs include dealing fees, stamp duty and the PTM levy. There is a Bid price (at which you can sell) and an Offer price for buyers. The spread between these varies and can be wide for less liquid shares.


Investment trusts are usually actively managed funds, but some replicate specific indices in the same way as an index tracker fund. There are trusts investing across most mainstream asset classes (for example, UK Growth, UK High Income, Global Growth, Global Emerging Markets). However, investment trusts are particularly well-placed in more specialised sectors that benefit from the closed-end nature of the fund. For example, trusts are available in Commodities, Property, Private Equity and Life Sciences.


As with other types of companies, there is an Annual General Meeting at which all shareholders are entitled to vote and an independent board of directors, appointed by shareholders. The Board will appoint a fund manager to manage its investments and will periodically review the appointment. This can result in a Board switching fund manager or changing the trust’s mandate, although this is rare. A few trusts are not externally managed but instead are “self-managed” where the CEO is a member of the board – though this is also rare.

Most of the recently established Investment Companies are structured as offshore companies (typically registered in Guernsey) whereas Investment Trusts are UK registered. There are no material differences between these structures as far as shareholders are concerned. Investment Trusts are listed on the official list of the LSE whereas Investment Companies may be listed on the Official List, AIM or SFM (Specialist Fund Market, a new exchange set up by the LSE in May 2008)


Unlike Unit Trusts, investment trusts can borrow (or gear up) in many ways from taking straightforward bank loans to issuing preference shares. The effect of this will be to exaggerate investment returns and increase risks. If an Investment Company has a high level of gearing there is a risk that a steep decline in the value of its assets may lead to a default in the terms of its loans and could lead to a total loss of shareholders funds.


Like other listed equities the price of a share in an investment trust is set by supply and demand. This can result in a share price sitting at a discount or a premium to its net asset value (effectively the liquidation value of selling all the investments within the trust). The premium/discount varies according to the perceived quality of the fund manager, the popularity of the investment policy and whether there is an active share buyback policy. The price may also reflect the level of gearing (or borrowing) of the trust. All of these factors may mean that the share price of a trust is more volatile than that of a unit trust. Typically, discounts narrow during rising markets and widen when prices fall. This effect is usually magnified if the trust employs gearing.


Annual management charges range from 0.3% to over 3% depending on the trust’s size and type of assets managed. Running costs for very small trusts can be disproportionate.


Past performance is not a reliable indicator of future returns

The value of your investment can go down as well as up, and you can get back less than you originally invested.

The Bestinvest Online Investment Service, including any account analysis and investment reports provided by our guidance services, is an online execution-only dealing service for investors who want to make their own investment decisions. It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice. Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

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© Tilney Bestinvest Group Ltd 2016.

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