Spread your risk, invest like a professional. Investment trusts give your greater reach and focus.

Investment Trusts

Many seasoned City professionals will expound the virtues of closed-ended investment trusts over their open-ended investment company (OEIC) counterparts. Investment trusts highlight lower fees, increased diversification and significantly better investment returns over the longer term.

Investment trusts also known as investment companies, allow investors to spread risk and access opportunities that would be unavailable to private investors through a direct route. Like OIECS or Unit Trusts, investors benefit from economies of scale within the fund and of course the specialist expertise of the fund manager.

However, investment trust managers do not have the concern or pressure of having to maintain liquidity or selling pressure if participating investors choose to withdraw their funds. This is especially relevant if panicked investors choose to sell in a rapidly deteriorating market. OIEC fund managers can be forced to sell their best most liquid holdings in order to meet redemptions, further potentially impacting performance.

Closed ended structures allow greater scope to invest in real assets, that are essentially illiquid and demand a long-term commitment in order to exact the very best returns.

Although some OIEC’s do invest in physical property, they are notorious for closing their doors on investors when there is increased selling pressure. This can effectively lock or gate investors into a falling asset as the manager struggles to find liquidity in the underlying assets.

Since the banking crisis, private equity has played an increasingly important role in corporate funding and consequently has shared significant benefits. Specialist investment trusts provide the means for private investors to participate in this area of investment. Due to the nature of these investments they are essentially unsuited to an OEIC structure.

The benefits of Investment Trusts

The long-term performance of investment trusts is significantly aided by the fact that the investment managers do not need to hold excessive cash balances or sell assets in order to accommodate redemptions as do their open-ended investment company (OEIC) counterparts.

Being ‘closed-ended’, managers can invest in less liquid assets such as private equity, infrastructure and specialist commercial property, therefore a longer-term plan can be engaged. This process can bring greater diversification to the strategy resulting in better long-term returns and more varied sources of income.

Another advantage of investment trusts is the ability not only to diversify sources of income, but manage cash flows. Reserves can be made in good years in order to maintain income levels in more difficult periods.

Investment trusts also have the option to borrow up to a certain percentage of the underlying portfolio. This can potentially amplify the returns if the environment is favourable and the opportunity appropriate. There are strict rules in place to limit this process in order to avoid magnifying the potential risk.

Discover today how Crossing Point's range of portfolios can provide your clients with strong, consistent risk-controlled returns.

Heritage Cautious Portfolio

Cautious Portfolio

The Heritage Cautious Portfolio is an active growth strategy. It is aimed at medium to long term investors who are seeking capital growth from a diversified portfolio of equity investment trusts.

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Heritage Balanced Portfolio

Balanced Portfolio

The Heritage Balanced Portfolio is an active growth strategy. It is aimed at medium to long term investors who are seeking capital growth from a diversified portfolio of mainly equity investment trusts.

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Heritage Strategic Portfolio

Strategic Portfolio

The Heritage Strategic Portfolio is a an active growth strategy. It is aimed at medium to long term investors who are seeking capital growth from a diversified portfolio of mainly equity investments trusts.

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Heritage Adventurous Portfolio

Adventurous Portfolio

The Heritage Adventurous Portfolio is a an active growth strategy. It is aimed at medium to long term investors who are seeking capital growth from a speculative portfolio of mainly equity investment trusts.

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Proof is in Performance

Analysis conducted by Winterflood Securities in late 2017 demonstrated that investment trusts beat open-ended funds around 80% of the time. A comparison table of 45 investment trusts with a five-year track record shows that 35 (or 78%) achieved better net asset value (NAV) returns and 36 (or 80%) delivered higher shareholder returns than their open-ended investment company equivalent.

Over a five-year period to the end of 2017, investment trusts on average annual outperformance was 1% for NAV and 2% for share price gains.

Tomiko Evans Chief Investment Officer
We are not stock brokers so we do not research or analyse individual company shares. We therefore do not offer individual stock based portfolios. We are asset allocators, market monitors and tactical traders.

Tomiko Evans

Chief Investment Officer

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