Investment Trusts or Unit Trusts

jimjames

I had an F&C newsletter come through at the weekend with predictions for the year ahead that I thought might be of interest for IT investors plus particularly no.5 to the gold fans!

1) Euro still to be weak
2)Increase in M&A activity
3) High yield stocks to perform
4) US 10 year bonds to fall
5) Gold to remain attractive
6) More QE
7) Larger companies to outperform small
8) Market peak in first half of 2011
9) Trade/currency wars to intensify
10) Euro crisis to escalate

Full newsletter online here
http://www.fundnets.net/fn_filelibra...mplete.pdf.pdf

darkpool

JSMill wrote: »

I have over the years read a great deal about Investment Trusts, most of it positive in terms of their charge profiles. I've always had it in my mind to invest in them but have not. When I asked my IFA, he was dismissive. The gist of it was that they somehow open-ended pooled funds now had more to offer. In addition that (for reasons not very too clear to me) ITs were old hat and many of them had closed down or were closing down. Was I told the truth, he whole truth and nothing but the truth? In particular, are they really withering away as he said, and if so is that because of confllict of interest for IFAs in dealing with them or rather something related to their poor performance? Any unclouding appreciated.

it sounds like your IFA isn't very independent. if i was you i'd read up on the subject and make your own investment decisions. if an IFA told me that i would probably question everything he told me.

dunstonh

JSMill wrote: »

I have over the years read a great deal about Investment Trusts, most of it positive in terms of their charge profiles. I've always had it in my mind to invest in them but have not. When I asked my IFA, he was dismissive. The gist of it was that they somehow open-ended pooled funds now had more to offer. In addition that (for reasons not very too clear to me) ITs were old hat and many of them had closed down or were closing down. Was I told the truth, he whole truth and nothing but the truth? In particular, are they really withering away as he said, and if so is that because of confllict of interest for IFAs in dealing with them or rather something related to their poor performance? Any unclouding appreciated.

If you look at the earlier posts on the thread, you will see that there is some basis in what is being said by this IFA. You will also get the answers to your questions if you ignore the anti-IFA trolls.

I wouldnt say that they are withering away. They certainly became less popular and many experienced investors moved to hedge funds, whilst inexperienced investors need to be on guard if they use them because of the increased risks (on like for like basis compared to a comparable OEIC).

jimjames

I received the latest Annual report today for one of the investment trusts I hold which had a useful bit of info to compare against unit trusts.

The IT is Edinburgh UK tracker and the detail related to dividends and how they can be boosted in an Investment trust compared to unit trust. Edinburgh UK tracker is different from other trusts in that all dividends are paid out rather than holding some back for poor years as some trusts do.

The dividend for 2010 was declared at 7.9p. As an investment trust can trade at a discount to its Net Asset value the dividend as a percentage of assets can be boosted as a result. This means that with a NAV of 284p the dividend would be 2.78%, however the share price is actually 266p which makes the dividend 2.99%.

As a result you are getting the dividend yield boosted by 0.2% which may not seem much but over the long term can add up. The discount on the Edinburgh UK tracker is also lower than most other trusts so the impact on their yield could be even more. The TER for the trust has dropped from 0.34% to 0.31% which compares pretty well with most other trackers.

moneylover

http://www.investorschronicle.co.uk/InvestmentGuides/Funds/article/20110323/082d303a-53da-11e0-ab23-00144f2af8e8/An-open-and-closed-case.jsp?utm_campaign=IC%2BDaily%2B-%2BFree&utm_source=emailCampaign&utm_medium=email

new article from IC to be followed up next week.

Reaper

As that article says there are a number of small fees which they will be covering in the follow up piece. Although each is small there can be a lot of them for an IT.

The best thing to look at the total effect of all charges. Unfortunately comparisons with Unit Trusts are made harder because ITs tend to measure their effect by showing the effect of charges as a reduction of the growth, wheras Unit Trusts just show TER. Plus I don't think either one inlcudes everything (eg stock broker fees in the case of IT and initial charges in the case of UT).

If only they could standardise illustrating the charges it would make things much easier.

Rollinghome

jimjames wrote: »

The IT is Edinburgh UK tracker and the detail related to dividends and how they can be boosted in an Investment trust compared to unit trust.

It's not a share I follow but the regular divergence from the index is interesting which I assume is due to the discount. I don't know what the spread is but looks enough there to earn an extra few pennies.

jimjames

I would assume that for the divergence too. The discount has varied from somewhere near 10% to 0% I believe but is around 4% at present.

The other factor with that graph is that it compares the share price to the NAV of the unit trust which is an accumulation fund. So I wonder if the inc units would show a different relationship to the IT shares.

Rollinghome

Well interesting that you say that. I'd expect the inc and acc versions of the same fund to be pretty much the same, as they seem to be, but... although H-L describe them in the selection listing as HSBC FTSE All-Share Index (Inst) (Income) and (Acc) the details they give are for HSBC FTSE All Share Idx A. In the dropdown, which I used for the chart, there's another listed as HSBC FTSE All Share Idx Inst with slightly better returns.

Investment 3 months 6 months 1 year 3 years 5 years
HSBC FTSE All Share Idx Acc-2.94% 6.32% 5.74% 16.91%1 4.14%
HSBC FTSE All Share Idx A Inc-2.96% 6.33% 5.78% 16.99% 14.2%
HSBC FTSE All Share Idx Inst Acc-2.91% 6.43% 5.98% 17.68% 15.37%

So if HL are offering the 'Inst' version, as they say, there seems to be yet another Inst class with still lower costs. Perhaps someone who's bought will know and presumably it's all buried on the HSBC site somewhere. Or it might be to do with when they reduced their charges a short while back.

On the Edinburgh tracker IT, the spread looks very close so there could be a little safe money to be made by watching the discount which isn't likely to widen beyond it's normal range.

moneylover

moneylover wrote: »

http://www.investorschronicle.co.uk/InvestmentGuides/Funds/article/20110323/082d303a-53da-11e0-ab23-00144f2af8e8/An-open-and-closed-case.jsp?utm_campaign=IC%2BDaily%2B-%2BFree&utm_source=emailCampaign&utm_medium=email

new article from IC to be followed up next week.

here is the second half of the article. Do any of our seasoned investors particularly like any of these investment funds - particularly any that are attractive to invest in at the present time

http://www.investorschronicle.co.uk/InvestmentGuides/Funds/article/20110324/5f25cef6-516e-11e0-a382-00144f2af8e8/Investment-trusts-to-boost-your-Isa.jsp?utm_campaign=IC%2BDaily%2B-%2BFree&utm_source=emailCampaign&utm_medium=email