Investment Trusts Trounce Unit Trusts

darkpool

Meeper wrote: »

However, I don't think it is going to be quite so easy. This is partly because the removal of the commission bias won't help with the knowledge bias. The average IFA is well over 50 and the odds are that he'll be as ignorant of the workings of investment trusts in 2013 as he is now, regardless of how he gets paid. The shift with RDR is bringing a much younger and better qualified IFA to the fore, however, so this is also likely to change.

so you're saying that IFAs will struggle to understand ITs? I didn't think ITs were really that hard to understand?

you seem to be agreeing that there is a commission bias with IFAs selling UTs? i thought IFAs were meant to act in the best interests of customers, yet you agree IFAs sell inferior products because they pay higher commission?

gadgetmind

Meeper wrote: »

It is hard, therefore, for the ordinary investor to figure them out – something that isn't helped by the fact that the sector does almost no effective marketing.

IT's aren't allowed to advertise, and their investors would take a dim view of money being used for this purpose rather than being either invested or returned as dividends.

Also, what's the point of advertising a close ended vehicle? It would be short-term price ramping and nothing more.

Old_Slaphead

gadgetmind wrote: »

IT's aren't allowed to advertise

Really?

Suggest you check out Money Observer.

le_loup

gadgetmind wrote: »

IT's aren't allowed to advertise, and their investors would take a dim view of money being used for this purpose rather than being either invested or returned as dividends.

Also, what's the point of advertising a close ended vehicle? It would be short-term price ramping and nothing more.

Oh, they do advertise alright. The purpose of which is to maintain interest and to try to minimise discounts.
Many also run no-or-low cost savings schemes for the same purpose.

darkpool

"Investment trusts, being quoted companies, are not allowed to advertise (except their full-scale prospectuses and their savings schemes)." from http://www.incademy.com/courses/Investment-trusts/Difference-from-unit-trusts/3/1006/10002

"Its are not allowed to advertise to the public to buy their shares (concessions are given for some new issues and IT savings schemes)." from http://www.bestinvest.co.uk/investment-research/investment-companies/it-vs-ut.aspx

I think ITs can advertise their saving schemes, but not their shares. you wouldn't expect any other type of company to tell the public to buy its shares.

saveonarola

Meeper wrote: »

Interesting that there has been no response to my post giving a more rounded view on the IT vs UT issue. How strange.

It was an excellent post.

Meeper wrote: »

In 2013, the paying of commission to IFAs by unit trust providers is to be banned. So investment trusts will suddenly find themselves on a level playing field in terms of advice – the IFA will no longer have an incentive to ignore investment trusts, not that the best ones do anyway, under the right circumstances. That means that everyone will immediately look to their virtues (price and performance)

Just thought I'd pick up on this, though. As you yourself showed, ITs are becoming less competitive on price. And as Linton's figures showed, there is as much variation as you would expect in the relative performance of ITs and UTs. As a whole, ITs don't appear to outperform UTs.

Lokolo

The average BMW has an accerlation from 0-60 of 5s*
The average Ford has an acceleration from 0-60 of 7*

BMWs have faster acceleration than Fords.

* speeds made up to make a point

Generally it's an invalid point, you will have some cars (investments) which perform better than others, and some which are total crap. Some will perform better in different areas etc.

It's all well and good saying ITs are better than UTs over the average - but honestly - who cares about the average? Who goes into investing thinking "You know what, I want to be average."? You go for the best, doesn't matter if its IT or UT.

darkpool

Lokolo wrote: »

Generally it's an invalid point, you will have some cars (investments) which perform better than others, and some which are total crap. Some will perform better in different areas etc.

It's all well and good saying ITs are better than UTs over the average - but honestly - who cares about the average? Who goes into investing thinking "You know what, I want to be average."? You go for the best, doesn't matter if its IT or UT.

but you might as well go for ITs which have been shown to outperform UTs in the last decades? if you were an IFA how could you justify investing clients' money into UTs as opposed to ITs?

or do we just start ignoring evidence?

Old_Slaphead

darkpool wrote: »

but you might as well go for ITs which have been shown to outperform UTs in the last decades? if you were an IFA how could you justify investing clients' money into UTs as opposed to ITs?

or do we just start ignoring evidence?

On UTs - more choice & lower buying/selling costs if you trade in/out relatively frequently via platforms.

It's horses for courses...long term holdings I'll use ITs but if I want shorter term country/sector focus then I'll go for UTs.

Big overall advantage, in my eyes, with ITs is that you trade at the now price rather than what price will be in 12-36 hours

Linton

darkpool wrote: »

but you might as well go for ITs which have been shown to outperform UTs in the last decades? if you were an IFA how could you justify investing clients' money into UTs as opposed to ITs?

or do we just start ignoring evidence?

No you question it. And like so much "evidence" you read on the net and in the output of journalists interested in a shock-horror story you find it is of doubtful validity.

Unfortunately too many people are too prepared to accept blindly what they read, especially if it confirms their prejudices.