Investors Spend £7bn on Alternative Income Trusts

Over the past 12 months to August 2017 investment trusts have raised £9.6 billion. Of this, 74% has been within what could broadly be termed alternative income

David Holder 10 August, 2017 | 4:24PM

In a world of prolonged and abnormally ultra-low interest rates, investors seeking income have been pushed away from historical areas of comfort. Low Gilt yields initially pushed investors into riskier assets such as corporate credit, commercial property and even equities. But as spreads in corporate bonds have narrowed and rental yields fall, we have seen increasing appetite for more esoteric asset classes designed to meet demand for income.

Investment trust providers have risen to the challenge, either by launching funds – raising capital from investors and listing on an exchange, of which Neil Woodford’s Patient Capital Trust (WPCT) was a recent and notable example – or by selling shares in the secondary market to meet ongoing investor demand.

Alternative Income Options Flood the Market

Over the past 12 months to August 2017 investment trusts have raised £9.6 billion from investors in these two ways – known as issuance. Of this, 74% has been within what could broadly be termed alternative income; those assets not directly comparable to equities or conventional bonds and which distribute a structured yield to shareholders.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Finsbury Growth & Income Ord885.00 GBX0.45
Scottish Mortgage Ord613.70 GBX0.69
Woodford Patient Capital Trust30.46 GBX1.04

About Author

David Holder  is a senior investment research analyst at Morningstar

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