Morningstar's Guide to Investment Trusts

Investment trusts would have turned £1,000 into a cool £1 million over the past 60 years, so why aren't these funds more widely held? We reveal the benefits and potential pitfalls

Emma Wall 9 February, 2015 | 7:00AM
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Do you know what an investment trust is? Open-end funds may grab the headlines and advertising billboards, but it’s the City’s best kept secrets that deliver outperformance decade after decade.

Despite these investment vehicles being around since 1868, trusts are much less known then their open-end fund peers. Investment trusts are closed-ended, meaning that they issue a fixed number of shares at launch, and then do not subsequently buy shares back or issue new shares, except in rare circumstances. Unlike with unit trusts or OEICs, investment trust managers are not automatically forced to use extra money to buy shares, perhaps at top prices, or sell holdings just because investors want out.

If you wish to trade the shares in an investment trust, there must be a buyer and a seller. Demand and supply dictates the price of the shares – and whether the shares trade at a discount or premium to the underlying value of the fund.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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