Trusts beat open-ended funds over last decade as RDR pressure builds

gadgetmind

http://www.investmentweek.co.uk/investment-week/news/2153360/trusts-beat-funds-decade-rdr-pressure-builds

“For those independent advisers who have ignored investment trusts and focused blindly on commission paying open-ended funds, the sector’s strong performance should make uncomfortable reading,”

One might hope that platforms such as HL that endlessly hype funds while describing trusts as "fuddy duddy" might also be squirming a little.

middlepuss

gadgetmind wrote: »

http://www.investmentweek.co.uk/investment-week/news/2153360/trusts-beat-funds-decade-rdr-pressure-builds

“For those independent advisers who have ignored investment trusts and focused blindly on commission paying open-ended funds, the sector’s strong performance should make uncomfortable reading,”

One might hope that platforms such as HL that endlessly hype funds while describing trusts as "fuddy duddy" might also be squirming a little.

I'm a fan of investment trusts too. But as you say there's no money in recommending investment trusts so they often get overlooked.

dunstonh

ut as you say there's no money in recommending investment trusts so they often get overlooked.

advisers are paid the same irrspective. The days of there being a difference are gone. The main problem with ITs is that they are treated as higher risk than comparable UT/OEICS and not ideally suited to the typical consumer that an IFA deals with.

I notice the article shows the best IT vs best OEIC in a sector. Maybe it should show the worst in both as well to give a more balanced view of the negatives as well as the positives.

Linton

dunstonh wrote: »

I notice the article shows the best IT vs best OEIC in a sector. Maybe it should show the worst in both as well to give a more balanced view of the negatives as well as the positives.

Good point, so looking at this from the trustnet data -

The worst OEIC/UT (Global Equity) perfomed better than the worst IT(Global Growth) in Global and Japan, all other sectors mentioned showed a better worst performance for ITs over 10 years.

BUT the article mentions ITs as performing better than OEIC/UTs in North America over 10 years The data in Trustnet doesnt support this. It only has data for one relevent IT as having been in existance for 10 years.

Also it states that UK Growth is better for ITs - there does not seem to be a comparable UK Growth OEIC/UT Sector, just a general UK all companies.

darkpool

dunstonh wrote: »

advisers are paid the same irrspective. The days of there being a difference are gone. The main problem with ITs is that they are treated as higher risk than comparable UT/OEICS and not ideally suited to the typical consumer that an IFA deals with.

you not think that is a half truth? until we have full RDR you can't really say that.

ITs are high risk and not suitable for the typical IFA consumer? I find it hard to believe that the likes of edinburgh IT is beyond the risk scale of the average IFA punter.

how long will MSE allow this bias on a consumer website?

rpc

Umm... How about the 20% gearing that the OEIC equivalent does not have?

And that's before you consider that when you come to sell the discount could be rather larger than when you bought.

I like Investment Trusts, but there are added risks compared to OEICs. There are also added benefits, but I can't speak as to the trade off an IFA would have to make.

darkpool

rpc wrote: »

Umm... How about the 20% gearing that the OEIC equivalent does not have?

And that's before you consider that when you come to sell the discount could be rather larger than when you bought.

i take you're point about the gearing, but a lot of these ITs trade on a 20% discount to NAV... and the discount is as likely to reduce as increase

i still wouldn't consider ITs as particularly high risk though.

gadgetmind

rpc wrote: »

Umm... How about the 20% gearing that the OEIC equivalent does not have?

Few use all the gearing that the regulations allow.

And that's before you consider that when you come to sell the discount could be rather larger than when you bought.

ITs are definitely for those who can choose when to buy (or drip feed) and also avoid being a forced seller, but the same is true of all equity investments to varying degrees.

dunstonh

you not think that is a half truth? until we have full RDR you can't really say that.

Yes I can. Contracts have been available now for a number of years that allow it.

ITs are high risk and not suitable for the typical IFA consumer? I find it hard to believe that the likes of edinburgh IT is beyond the risk scale of the average IFA punter.

When you have the FOS upholding complaints that an accountant couldnt be expected to understand the taxation of investments then you really underestimate the level of regulation that exists. How about a complaint that was upheld as the person was a courier and wouldn't be able to understanding investing.

how long will MSE allow this bias on a consumer website?

Yes, your bias is becoming tiresome.

atush

gadgetmind wrote: »

Few use all the gearing that the regulations allow.



ITs are definitely for those who can choose when to buy (or drip feed) and also avoid being a forced seller, but the same is true of all equity investments to varying degrees.

That last bit is so true. I have been a buyer of ITs for a while but haven't sold many. But his year I had to time 2 sales as the time I would normally have beg of Sept, end of Aug for Uni expenses, I had to wait for recovery after the August price plunge.

Good thing I didn't need the money on a specific date and this should be the rule with most investments- ie to not be a forced seller but have some other cash to use in the meantime.

barak

What dunstonh actually said is that "they are treated as higher risk than comparable UT/OEICS". That surely is true and understandable!

I now have more invested in ITs than UT/OEICS - but they are clearly higher risk. Where gearing is used they are inevitably more volatile. I've had great successes and some bad experiences - including one IT that became worthless.

I can see why dunstonh says that ITs are "not ideally suited to the typical consumer that an IFA deals with."

They are more suited to the committed DIY investor - perhaps with a substantial portfolio - and some personal experience of attitude to risk.