To glean a better understanding of the importance of investment trusts to customers, the Association of Investment Companies (AIC) spoke to the three platforms with the largest shares of investment trust assets – Hargreaves Lansdown (6.9%), Interactive Investor (6%) and AJ Bell (2.3%).
Emma Wall, head of investment analysis and research at Hargreaves Lansdown said investment trusts have grown in popularity across all age groups and an increasingly diverse number of sectors and providers are featuring in the monthly top ten most bought trusts, most notably renewable energy trusts, private assets and infrastructure.
AJ Bell echoed the sentiment, noting that the sector gives investors access to great managers with the added bonus of being able to trade shares at any point in the day and to pick up trusts trading at an attractive discount.
Laith Khalaf, head of investment analysis at AJ Bell, said: “The ability of trusts to smooth dividend payments by using their revenue reserve is an extremely appealing feature for those looking to generate income from their investments, especially those drawing down their SIPP in retirement. The closed-ended nature of investment trusts also allows investors to access more illiquid asset classes without the extra worry of fund gating, or managers holding high cash balances to meet redemptions. If investment trusts didn’t exist, the market would have to invent them.”
Kyle Caldwell, funds and investment education editor of Interactive Investor, said customers attempt “to bag themselves a bargain” when an investment trust trades on an unusually wide discount, in the hope that the share price will narrow towards the value of the underlying investments. However, the biggest trend among interactive investor’s customers is a focus on dividend payers, Caldwell said.
“Investment trusts are allowed to save some income for a rainy day, as they can retain 15% of income generated by their holdings each year. For our customers looking for a consistent income stream, these so-called revenue reserves are a key attraction,” he added.
Main image: martin-sanchez-NfLZeAN7I6s-unsplash
