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Trusts where investors swim in a bigger pool 
People have been using investment trusts as a way into global stock markets for more than a century. The first was launched in 1868 and there are now more than 300 of the schemes, managing billions of pounds’ worth of assets on behalf of investors.
Investment trusts are, in effect, companies that buy and sell shares in other firms. Your money is pooled and a professional fund manager is appointed by a board of directors to pick the underlying shares. The idea, as with their better-known rivals, unit trusts, is that investors spread the risk of stock market investment across several shares so that they are not over-exposed to only one company. But there are several key differences between unit and investment trusts. The main one is that investment trusts are listed on the London Stock Exchange and investors buy shares rather than units in the fund. The price of the investment trust’s shares does not necessarily reflect the underlying value of the assets in the trust because the price is dictated by market demand, not the value of the trust’s share portfolio. If demand is strong and the share price is above the value of the underlying portfolio – called the net asset value – the investment trust is said to be trading at a premium. When the share price is below the net asset value, however, it is said to be trading at a discount. A 10% discount would allow you to purchase 100p worth of assets for 90p. Investment trusts also have the freedom to ‘gear’, by borrowing more money to invest in shares. The aim is for the investment to outperform the cost of the borrowing. If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |