Why Do Investment Trusts Outperform?

New research by CASS Business School shows that investment trusts showed significant outperformance versus open-end funds

Cherry Reynard 2 July, 2018 | 7:49AM

London UK city of london investment trusts closed-end fund open-end fund

Investment trusts have long been seen as a side-line to open-ended funds, suitable for illiquid or esoteric assets and a marginal part of the investment industry. However, new research finds that not only do investment trusts outperform their open-ended equivalents, it is the closed-ended structure that allows them to do so.

New research by CASS Business School shows that even setting aside structural factors such as holding more illiquid assets, or smaller companies, investment trusts still showed significant outperformance over their benchmarks and open-ended peers. This had little to do with advantages such as gearing and far more to do with the flexibility that the structure provides managers.

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About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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