Investment trusts unlike their unit trust and OIEC counterparts are fully quoted shares in heir own right. They have a number of advantages over collective investment schemes or collectives as follows:
- Long term performance is superior.
- Charges are generally lower and certainly more transparent.
- They have the ability to borrow.
- Investment trusts trade at either a discount or a premium to their net asset value.
- They have a board of directors who can keep a check on the fund manager.
- They are close-ended meaning that only a finite number of shares are issued.
- Investment trusts have an excellent long term record of rising dividends.
So what are their disadvantages compared to collectives?
- Being shares they are higher risk than unit trusts and OEICs.
- There is no investor protection under the Financial Services Compensation Scheme (FSCS).
- Their share price can worsen compared to their net asset value.
- Their share price is more volatile falling more in a bear market and rising higher in a bull market.
The good news is that if you own investment trusts within an OEIC such as The Intelligent Wealth Fund then you do have the investor protection afforded by the FSCS.
The reason why investment trusts feature in our fund is primarily because of better long term performance and generally lower charges than collectives. Our whole mantra is superior investment performance and these are two of the best ways to achieve this. After all that’s intelligent investing.
So if you would like to achieve better long term returns supported by investor protection you should invest in The Intelligent Wealth Fund.
Tony Byrne
Managing Director
Minerva Money Management
