Investment Trust recommendations - please advise me!

Michael1927

It is easy to get recommendations for unit trusts as advisors get a commission for sales, however does anyone know where to find recommendations for investment trusts? Apparently, investment trusts outperform unit trusts on average, so it makes sense to use them.

Retired_I.F.A.

Historically as you say they have performed better on average but the distance between the poorest and the best is far greater than the same distance with unit trusts as there are higher risks involved.
An investment trust is like a company whereby if the directors feel that the market is undervalued they can borrow money using the shares as collateral in order to buy more shares. So if they are proved wrong down goes the value of the trust and of course the oppisite may happen too. A unit trusts however cannot borrow a.k.a. gearing so it's value is solely the underlying investment value as theres no debts involved.
Oh and may of them do pay commission too, possibly all of them nowadays bearing in mind i've been out of the buisness for 5 years now.

EdInvestor

Info and discussion on ITs over here:

http://boards.fool.co.uk/messages.asp?mid=10769077&bid=50097

cheerfulcat

Lots of info and links on the AIC website.

dunstonh

It is easy to get recommendations for unit trusts as advisors get a commission for sales, however does anyone know where to find recommendations for investment trusts?

Your comments about remuneration being the issue are a bit of a myth.

Advisers are authorised to recommend packaged products but are not authorised to recommend quoted stocks. There are some packaged ITs (and these pay commission) but most are not. So the majority of advisers wont have ITs available as an option for them. Only those with brokering services or extra permissions will have the authorisation.

Apparently, investment trusts outperform unit trusts on average, so it makes sense to use them.

On a like for like basis, investment trusts are usually higher risk than the unit trust. So in growth periods, you would expect outperformance. Although the opposite will happen when things go down. Plus ITs can borrow money to invest and that can significantly increase growth when things are good but be catastrophic when things go wrong.

If you have the experience and knowledge, you may well find ITs are a better option for you. If you are new to investing and dont want to invest the time to learn, then unit trusts are probably the better option.

Michael1927

Thanks Dunstonh!

Do you in fact know of any websites, magazines or IFA bulletins which contain advice or recommendations for investment trusts?

Aegis

Michael52 wrote: »

Thanks Dunstonh!

Do you in fact know of any websites, magazines or IFA bulletins which contain advice or recommendations for investment trusts?

Advice like that requires knowledge of your financial situation, risk profile, etc. You might be able to read up on the pros and cons from an objective point of view, but you're unlikely to find advice or recommendations from a reputable source due to FSA regulations.

Slim

ITs are generally a better bet because in most cases their TER (total expense ratio) is significantly lower than UTs because they don't pay commission.
To say that they are higher risk is too much of a generalisation. The converse of gearing is that if they see their market overvalued they, unlike UTs, are able to go liquid ie sell their shares and put the money on short tem deposit. Personal Assets Trust is a good example - this trust is certainly lower risk than most UTs.

Milarky

the investment trust (IT) model was invented before unit trusts came alone. The are 'closed' quoted stocks rather than 'open' investment companies (i.e. as Slim pointed out, they hold all their own capital and effectively issue tradeable shares against these holdings)

I'd be interested in the IFA comments about the 'range' of IT companies cf the unit trust 'universe'. Remember slit-capital trusts a few years back? These were ITs too and got into all sorts of trouble due to cross holdings and (presumably) too much of the old gearing. Could the unit trust model have ever replicated quite the riskiness of these I wonder?

Mr_Mumble

Investment Trusts magazine should be available from all good newsagents (outdated website: http://www.investment-trusts-magazine.co.uk/)

Investment Trust Newletter (including downloadable sample copy):
http://www.tipsheets.co.uk/investmenttrustl.html

Investment Trust Scrutineer (including downloadable sample copy):
http://www.newlandsfr.co.uk/scrutineer/index.html

No single issue of any of these will give a holistic view of all 400+ investment trusts though. Plenty of info on the IT management company websites:

http://forums.moneysavingexpert.com/showpost.html?p=5563465&postcount=9