Investment Trusts

Richmmm

I am looking for a fund that will pay out income. Most Equity income funds only payout twice a year, but it seems investment trusts pay out 6 times per year, which would be better for me.

However, I have always thought that ITs are more expensive due to the extra layer of management. Am I thinking wrong?

Can anyone point me towards a site that compares ITs? vs UTs for income?

Rich

DRS1

What Investment Trust pays out income 6 times a year?  That is a new one for me.

There are some unit trusts which pay out monthly which may suit you better?  Invesco Perpetual Monthly Income Plus or Artemis Strategic Bond are two but I imagine there are more.

Yes OK Those are not equity income.

ColdIron

Most ITs pay quarterly though it can be 'clumpy' depending upon the quarterly cycle but it's not that important. Same with open ended funds IME

I'm not sure what that extra layer is but ITs and funds are broadly similar in that respect, a single manager or team. Some of the larger ones such as CTY can be as little as 0.37% pa

Try Trustnet for wider comparisons but The AIC is a decent resource for IT screening
https://www.theaic.co.uk/aic/find-compare-investment-companies?sortid=Name&desc=false

Or for well established 'dividend heroes'
https://www.theaic.co.uk/income-finder/dividend-heroes

dunstonh

I am looking for a fund that will pay out income. Most Equity income funds only payout twice a year, but it seems investment trusts pay out 6 times per year, which would be better for me.

Why would it be better?

The modern way of doing things is to hold a cash float.  Distributions go into the cash float and a fixed monthly draw is taken (that equates to the anticipated yield).    Many don't even care much about yield nowadays as its been an underperforming strategy post credit crunch and total return has been king.

DRS1

I am not sure if this allowed but there is an interesting list of investment trusts which pay a high income here and I see it now has a column for dividend heroes!

High Yield Investment Trusts - AIC Sector and Yield table (December 2025) - The Lemon Fool

cloud_dog

Or perhaps have look at some of the IT Dividend Heroes, and see if you can align the different ITs dividend schedules to meet your requirements.

Alternatively, ignore dividends, invest for growth, sell some each year, put into savings account that allows you to set a repeating withdrawal schedule, e.g. Ford Money, Gatehouse, etc.  Rinse and repeat.

Eyeful

Richmmm: 
Do you understand that Investment Trusts can have a Premium/ Discount?
If not suggest you look into it.

Alexland

Richmmm said:

However, I have always thought that ITs are more expensive due to the extra layer of management. Am I thinking wrong?

ITs tend to be actively managed which costs more than passive management however many of them deploy leverage (borrowing using the assets as security to invest in more assets which generate a higher return than the borrowing cost) which, over the long term, tends to generate a little uplift in returns to cover the higher management cost.

I wouldn't pick an investment on the frequency of dividends - it's more important you agree with the strategy.

It's the strategy that produces the investment returns not whether it's a OEIC fund or an IT, although an IT has the ability to smooth the dividends and of course may trade at a premium/discount in accordance to how much people consider it to be worth going for.

I wouldn't suggest picking on yield either as ITs can generate high or increasing yield while the capital and/or dividend growth does not keep up with inflation. If you are going to invest in ITs then you have a lot to consider as they are more advanced than OEIC funds.

Rollinghome

The AIC site (the Association of Investment Companies) has the most information on ITs.  There is also a lot of information there on how ITs work. Trustnet has much less information but covers funds and ITs.

Most ITs pay dividends either 2 or 4 times a year, and some people prefer them for income because they are able to smooth out dividends. But if you invest be sure to take into account total returns. Not just the dividend or the share price return in isolation.

That's because in response to demand from some investors there are ITs that now pay some of the dividend from capital - i.e. they liquidate holdings to give you, what is in effect, some of your own money back as a "dividend". JPMorgan now manage several ITs that do that, usually described as "***** Growth and Income".

Henderson Far East Income (HFEL) is another example that pays a tempting dividend of 10.66% pa. But it's total returns, income + capital, are by far the worst in the sector.  Despite that, the share price sits at a 4.33% premium to net asset value (NAV), the only one in the sector not at a discount, and has the highest ongoing charge.

Some run in that way do have a reasonable total return, but be aware if your dividends are in part funded from capital. Most of my equity investments have always been in ITs which I much prefer, but they do need a basic understanding of how they work.

poseidon1

Reading one of your past posts on annuity provision, I can see regular automated income receipt is important to you, rather than you having to  put time effort  and expertise in generating 'income' from growth investments.

Given your requirement for automated income from equity investments, I agree Investment Trusts can be an option and @DRS1 has provided a link to all the high yield trusts albeit inclusive of more specialist bond, REIT and infrastructure variants as well as equity income.

Expense ratios will vary, but the likes of the ever popular City of London Investment Trust ( which pays quarterly) has a very long pedigree ( over 100 years) in delivering rising income and reasonable prospects for capital growth, so the sector is worthwhile your exploring along side Equity income unit trusts.

I also use an Investment Trust for regular monthly income, although in my case it's the specialist Twenty four Select Monthly Income  Trust ( Bonds), current yield 8%. However, it is considered a complex investment which cannot be bought on the major DIY platforms without completing and passing a sophisticated investor questionnaire.



 

nakie999

Investment trusts are not automatically more expensive. Many have ongoing charges similar to, or even lower than, comparable unit trusts. The extra layer you mention mainly affects structure, not day to day costs. What matters is the ongoing charge figure and any performance fee.

The more frequent payouts come from how trusts smooth income using revenue reserves. That can suit you if you want regular cash flow, but it does not increase total return. It only changes timing.