Investment trusts, often dubbed investment companies or closed-ended funds, are one of the oldest types of investment vehicles, dating back to the 19th century.
Investment trusts were a Victorian invention and flourished on the back of the wealth that the British Empire generated. They were a means to raise private capital to fund new developments, like railways and plantations across the world. They also allowed more moderate investors the same access to the stock market that had previously only been available to much larger capital investors and organisations.
The first investment trust was established in 1868 by Philip Rose as the Foreign & Colonial Government Trust (now the Foreign & Colonial Investment Trust) in London. The first portfolio was made up of 18 ‘foreign and colonial’ government bonds from across the world, specifically in the more developed markets of Europe, South America, the Middle East, US and New Zealand. After 150 years, the F&C Investment Trust still holds its prominence in the industry as one of the world’s best performing investment trusts with £4000 m FUM today.
The Scottish American Investment Trust was set up in 1873 and funded the construction of the railways to bring together the United States of America. Similarly, the Scottish Mortgage Investment Trust was launched in 1909 to offer mortgages to rubber plantation owners in Malaysia who wanted to benefit from the boom in rubber caused by the Model T Ford motor car. Witan was also set up in 1909 to look after the fortunes of the families behind the London and North Eastern Railway and the Manchester ship canal.
Throughout its long history, the investment trust industry has continued to adapt to meet investors’ needs. In the last decade, the infrastructure, debt and property sectors have evolved to satisfy demand for income. The investment trust industry has continued to invest in groundbreaking opportunities including technology, biotechnology and healthcare, emerging and frontier markets, private equity and venture capital. These recent developments continue make investment trusts both highly attractive and relevant to investors.