Why Invest in Closed-end Funds?

The closed ended nature of trusts allows the fund manager the flexibility to manage a fixed pool of assets largely free from the distractions of investor inflow and outflows

David Holder 23 October, 2015 | 2:30PM
Facebook Twitter LinkedIn

Morningstar approach the analysis of Closed Ended Funds (Investment Trusts) with the same vigour and methodology that we apply to any other investment strategy and we feel very strongly that they can and should play a central role in many client portfolios. There is much to like about the structure when compared to other types of investment vehicles such as Unit Trust and OEICs.

The closed ended nature of the vehicle allows the fund manager the flexibility to manage a fixed pool of assets largely free from the distractions of investor inflow and outflows. This is a definite advantage when it comes to investing in less liquid asset classes and arguably allows the fund manager to pursue a purer form of his investment philosophy than might be possible in an alternative open ended investment vehicle.

Other key advantages include the potential effect of gearing although this can work adversely, the generally competitive fees charged by many Investment Trusts and the oversight and advice given from an independent board. Of course the structure of the investment vehicle will largely be irrelevant if the fund manager lacks the ability or resource to be able to add value over and above his relevant benchmark over the longer term.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

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.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
City of London Ord365.43 GBP-3.32Rating
Witan Ord236.72 GBP-2.98Rating

About Author

David Holder  is a senior investment research analyst at Morningstar