Investment trusts in FTSE indexes

aroominyork

It's not a complaint, I don't buy FTSE trackers. It's the anomaly issue, of ITs forming part of the indexes whereas they are just a collection of shares in other companies and the open ended equivalents are not there. Over and (unless it gets interesting) out.

k12479

aroominyork wrote: »

It's the anomaly issue, of ITs forming part of the indexes whereas they are just a collection of shares in other companies...

But ITs are companies still and the same argument also holds true for other constituents - the likes of say Anglo American or Shell are a collection of global holdings in various wholly-owned subsidiaries, majority and minority stakes and joint ventures.

grey_gym_sock

i agree it's an anomaly.

i disagree that ITs are "just a collection of shares in other companies". that is a fair description of many ETFs. but even when an IT holds nothing but shares in other companies, it is not just a collection, because it may trade at a significant discount or premium to the net asset value of those shares. and then, an IT may also use gearing (or hold cash). and may also hold unlisted investments. but you do get an investment with different characteristics, just by putting some quoted shares inside a closed-ended quoted company.

i suppose one could argue that indexes should fully include ITs, to capture the different investment characteristics you get by holding (e.g.) BP inside an IT, but should scale down their weighting of BP itself in indexes, to exclude shares in BP held by other quoted companies (including ITs). so e.g. if 1% of BP shares are held by ITs, one could base BP's weight in indexes on 99% of its market capitalization, not 100% .

i don't think any indexes do this now. though they do something comparable: they scale back shares' weightings based on the free market float, i.e. excluding any very large individual shareholdings.