Is there much difference between ETF's and Investment Trusts?

Thrugelmir

GeoffTF said:

ETFs are much more complicated beasts than ITs. Here is an overview of how ETFs work:

https://www.blackrock.com/au/intermediaries/ishares/authorized-participants-and-market-makers

I'd say that the apparent transparency of ETF's is what draws people in. IT's ( indeed closed-ended investment companies generally, as extend beyond the main IT's) require a lot more consideration and understanding. 

GeoffTF

Alexland said:

GeoffTF said:

ETFs are much more complicated beasts than ITs.

I'd argue ITs are just as complicated in other ways like digging through their annual reports to understand their borrowing arrangements, AGM and Q&A sessions with the board and manager, understanding why premiums or discounts may have developed, etc.

ETFs are structurally more complicated than ITs, mostly because of the mechanism to prevent a significant discount or premium to Net Asset Value from developing. ITs are just companies whose purpose is to make and hold investments. The large liquid broad market ETFs are simple from the point of view of the retail investor. He need not worry about what is going on behind the scenes. If you are an active investor, deciding whether to invest in an IT is more complicated than just buying a broad market tracker. The evidence, however, suggests that active investment is a fool's errand (unless you are getting a percentage to gamble with other peoples' money). Nonetheless, active investors provide most of the liquidity in the market and set prices, so I do not want to wish them away.

grumiofoundation

GeoffTF said:

Alexland said:

GeoffTF said:

ETFs are much more complicated beasts than ITs.

I'd argue ITs are just as complicated in other ways like digging through their annual reports to understand their borrowing arrangements, AGM and Q&A sessions with the board and manager, understanding why premiums or discounts may have developed, etc.

ETFs are structurally more complicated than ITs, mostly because of the mechanism to prevent a significant discount or premium to Net Asset Value from developing. ITs are just companies whose purpose is to make and hold investments. The large liquid broad market ETFs are simple from the point of view of the retail investor. He need not worry about what is going on behind the scenes. If you are an active investor, deciding whether to invest in an IT is more complicated than just buying a broad market tracker. The evidence, however, suggests that active investment is a fool's errand (unless you are getting a percentage to gamble with other peoples' money). Nonetheless, active investors provide most of the liquidity in the market and set prices, so I do not want to wish them away.

Or she…..

cloud_dog

isayhello said:

tacpot12 said:

Between you and Alexland you have understood the main differences between ITs and EFTs. I hold a mixture of both in my retirement portfolio. Overall I'm happy with both. During the Coronavirus pandemic, my IT holdings did manage to maintain their dividends more that the ETF did. Both bounced back with the recovery. 

Ok overall it doesn't seem like there is a major reason to prefer one over the other then.

You need to be aware that ETF can use different index replication methods.  They can (although this is probably more relevant to ETCs) have counter party risk with the asset.