Investment Trusts not covered by the FSCS?

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  • jimjames
    jimjames Posts: 17,619 Forumite
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    melbury wrote: »
    This has never crossed my mind.

    Surely investment trusts are the same as buying shares in any other company, so there is no reason why they would come under the FSCS any more than if you had bought shares in Tesco.

    Exactly. I was a bit confused by the question but I guess it's understandable if you're not clear on the differences
    Remember the saying: if it looks too good to be true it almost certainly is.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    Audaxer wrote: »
    What are the distinct advantages long term? Is it the fact that they can hold back income in good times to continue with growing dividends in bad times, or are they other advantages?
    The flexibility to not have to pay out all their income is one positive. Ability to borrow from banks or other investors to provide gearing on investment returns can be another.

    The major one is that a closed ended fund is not compelled to sell off its assets, pay out cash and get smaller, just because an investor no longer wants to invest. If an investor in an investment trust no longer wants to be an investor, the investor simply sells their shares to someone else via the stock exchange at whatever price the other person is willing to pay. The investment trust's portfolio continues intact.

    This means that the trust can invest in interesting or illiquid stocks without having to dump them at fire-sale prices to meet redemption requests (which could cause a loss for all holders despite the assets being fine if they could have been held for the longer term), and likewise they don't have to hold cash on hand (a drag on performance) to be able to meet redemption requests.
  • Audaxer
    Audaxer Posts: 3,508 Forumite
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    melbury wrote: »
    This has never crossed my mind.

    Surely investment trusts are the same as buying shares in any other company, so there is no reason why they would come under the FSCS any more than if you had bought shares in Tesco.
    Yes, but that is one of the reasons I wouldn't invest in individual shares. My consideration was ITs or funds, so I was just trying to establish if there was a risk of an Investment Trust going bust, as I was considering investing fairly large amounts in various ITs.
  • Malthusian
    Malthusian Posts: 10,941 Forumite
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    bigadaj wrote: »
    though of course if you use a fund manager/ adviser then nothing can go wrong, someone like Nicola Horlick for example, oh no, hang on....
    The idea was to appeal to investors online for funding to get the business, which aims to make Hollywood movies, off the ground. She used a well-known website, Seedrs Capital, where tennis champion Andy Murray sits on the advisory board.

    Who told you that if you invest in Hollywood films via crowdfunding nothing can go wrong?
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    Malthusian wrote: »
    Who told you that if you invest in Hollywood films via crowdfunding nothing can go wrong?

    Where's the second quite from?
  • parcival
    parcival Posts: 949 Forumite
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    I seem to remember major problems about 15 years ago with Zero funds which I think were Investment Trusts. Many of these lost a lot of money and I recall the Financial Ombudsman did a major investigation which resulted in compensation being paid...
  • jimjames
    jimjames Posts: 17,619 Forumite
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    parcival wrote: »
    I seem to remember major problems about 15 years ago with Zero funds which I think were Investment Trusts. Many of these lost a lot of money and I recall the Financial Ombudsman did a major investigation which resulted in compensation being paid...
    They were actually split capital investment trusts which had geared shares and zero dividend preference shares. When the market crashed the gearing left some shares worthless.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • oldwally
    oldwally Posts: 106 Forumite
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    jimjames wrote: »
    They were actually split capital investment trusts which had geared shares and zero dividend preference shares. When the market crashed the gearing left some shares worthless.

    Aberdeen had quiet a few of them..........I had one :(
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