Investment Trusts or Unit Trusts

dunstonh

Reaper wrote: »

There is a recent article in the FT called "Impact of fund fees revealed" which quotes a study that compared funds that offer an OEIC and IT option. In 70% of cases the IT wins over 3 years, 5 years and 10 years because of the lower charges.
http://www.ft.com/cms/s/2/5968b962-a95a-11e0-bcc2-00144feabdc0.html#axzz1RnD2Dcoy

I read that the other day and thought it missed the point. Also, a couple of the comparisons were not what I would class as close.

UTs are packaged investments. ITs are not. Although UTs are heading the way of ITs if you look at unbundled platforms. UTs bundle in everything together (investment, platform and adviser). ITs are just one element of that. If you add the platform and adviser cost (where applicable) then you end up with a similar cost basis. e.g. the daftly compared Jupiter funds (comparing an Opps fund with a general European fund just because it has the same manager is not logical as well as the gearing difference). The IT has a TER of 1.17% not including adviser and platform. The UT has a TER of 1.81% including adviser and platform. On unbundled platforms, the UT TER by itself is 1.04%. Thats lower than the IT.

Reaper

dunstonh wrote: »

UTs are packaged investments. ITs are not. Although UTs are heading the way of ITs if you look at unbundled platforms. UTs bundle in everything together (investment, platform and adviser). ITs are just one element of that. If you add the platform and adviser cost (where applicable) then you end up with a similar cost basis.

It would help if we had access to the study itself because then we could find out what purchase and running costs were included in the calculation.

You say ITs are only part of the package and indeed if buying them through somebody like HL they will slap on extra charges, however it is also possible to buy them direct. Unlike UT/OEICs it tends to be cheaper to go direct than through a discount broker.

e.g. the daftly compared Jupiter funds (comparing an Opps fund with a general European fund just because it has the same manager is not logical as well as the gearing difference). The IT has a TER of 1.17% not including adviser and platform. The UT has a TER of 1.81% including adviser and platform. On unbundled platforms, the UT TER by itself is 1.04%. Thats lower than the IT.

I accept that but who can ever achieve 1.04% TER on the UT? To get it unbundled I would have hand money over to somebody - such as an annual fee to a platform.

Reaper

dunstonh wrote: »

The IT has a TER of 1.17% not including adviser and platform.

Are you sure? According to their factsheet the Jupiter European Opportunities TER is 1.05%

dunstonh

Are you sure? According to their factsheet the Jupiter European Opportunities TER is 1.05%

I just went to the FT link on their article.

You say ITs are only part of the package and indeed if buying them through somebody like HL they will slap on extra charges, however it is also possible to buy them direct. Unlike UT/OEICs it tends to be cheaper to go direct than through a discount broker.

Yes. Which is why comparing packaged and non packaged like that isnt really like for like. We could take it a stage further with shares. Its all pros and cons of different options rather than like for like.

JamesU

moneylover wrote: »

can you post a link? I don't really know anything about Alliance Trust although I do know that I may buy some ITs rather than UTs

Recent link on the most popular IT purchases at Alliance Trust over the last 6 months via their i.invest platform (£1.50/trade) here:

http://www.investorschronicle.co.uk/InvestmentGuides/Funds/article/20110708/128e46b2-a8a4-11e0-b6c2-00144f2af8e8/20-most-popular-investment-trusts.jsp

JamesU

GrowingMyOwn_2

I think Investment Trusts are considered a more risky option than Unit Trusts by buyers, especially novice buyers.

Personally, I think ITs are not necessarily more risky but definitely more complex, which is possibly what puts buyers off.

Here are the things that I think give ITs their complexity value:

1) not so easily tradable on fund platforms - I can put £50 a month into thousands of UTs in one place, but I still have to have a separate account if I want to drip money into an IT and can't switch into another fund so easily, if I want to.

2) commissions aren't paid so ITs don't receive as much advertising - a good thing for more discerning investors, not so good for novices.

3) the discount/ premium makes many investors nervous - with UTs, you more or less buy what it says on the tin minus fees, with IT's the discount/ premium and its ability to widen or narrow adds another layer of complexity. That's fine but its not so easy to get hold of Z scores and other data that might be helpful when evaluating an IT.

Growing My Own

sabretoothtigger

The discount thing means IT arent forced to sell assets at bad times. Its an advantage I think and also to the buyer, I'd rather have IT at 10% discount then buy a tracker at equal value to the market

THE CAPITAL ONLY NET ASSET VALUE PER SHARE IN PENCE, WITH DEBT AT PAR VALUE, AS AT MARKET CLOSE ON



14 July 2011 WAS AS FOLLOWS:











JPMORGAN INDIAN INVESTMENT TRUST PLC: 5

465.77



JPMORGAN INDIAN INVESTMENT TRUST PLC:

482.02















5 The above NAV assumes that the

8,572,574



Subscription shares rights have been exercised at 247p (closing strike price for January 2012).

JII is 420p. I bought some recently, I put down a 'deposit' on a sub share in Feb ,gained the full gain since (unfortunately not much :laugh:) and finished payment recently for zero charge.

dunstonh

Personally, I think ITs are not necessarily more risky but definitely more complex, which is possibly what puts buyers off.

The gearing and the pricing is what increases the risk.

1) not so easily tradable on fund platforms - I can put £50 a month into thousands of UTs in one place, but I still have to have a separate account if I want to drip money into an IT and can't switch into another fund so easily, if I want to.

Not an issue with unbundled platforms but that is quite normal with bundled ones. However, that comes back the way costs and covered with packaged and unpackaged investments.

2) commissions aren't paid so ITs don't receive as much advertising - a good thing for more discerning investors, not so good for novices.

They cant advertise (apart from packaged ones). Commission is not to do with that

GrowingMyOwn_2

@ Dunstonh - apologies but I can't seem to get the multiquote thing to work. I will type my replies in bold.

Quote:
Personally, I think ITs are not necessarily more risky but definitely more complex, which is possibly what puts buyers off.
The gearing and the pricing is what increases the risk.

Agree with gearing and also changing premiums/ discounts. Again, I re-iterate that investment trusts are more complex products, which, on second thoughts does increase risk.



Quote:
1) not so easily tradable on fund platforms - I can put £50 a month into thousands of UTs in one place, but I still have to have a separate account if I want to drip money into an IT and can't switch into another fund so easily, if I want to.
Not an issue with unbundled platforms but that is quite normal with bundled ones. However, that comes back the way costs and covered with packaged and unpackaged investments.

Can you point me to a platform which will allow me to drip, say £100/ month into a range of investment trusts from any provider without having to pay normal stockbroking charges?


Quote:
2) commissions aren't paid so ITs don't receive as much advertising - a good thing for more discerning investors, not so good for novices.
They cant advertise (apart from packaged ones). Commission is not to do with that

Exactly - so we are in agreement that, whoever pays for the advertising, investment trusts are at a disadvantage to unit trusts because they are not so well advertised. When you have advertising for unit trusts coming from fund houses and platforms, it is only logical that unit trusts will become more familiar to the public.

Totton

Also there is very good data at the AIC site - http://www.aicstats.co.uk/conventional/index.asp

Regards,
Mickey