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What You Need to Know About Investment Trusts - YouTube
Channel: Morningstar Europe
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he wants an exposure to the market
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everything they need in place hello and
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welcome to morning star I'm Emma Wallen
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here with me today is Ian says director
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general of the Association of investment
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companies hello Ian hi so we're here
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today to talk about investment trusts
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we're running an investment trust
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special report week this week what is an
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investment trust well an investment
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trust is a type of collective investment
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fund so like all collective investment
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funds you get a group of investors
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together they put their money into a
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single fund and then that's handed over
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to a professional fund manager who
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invests in a wide range of different
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investments to spread risk one of the
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key sort of differences though to other
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kinds of funds is that the way you buy
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and sell the your shares in the
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investment trust is by going through the
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stock exchange you go to a broker and
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you buy those shares and with the
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emergence of online share dating
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services these days it's very very easy
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and quick and cheap to buy and hold them
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through these services and that's called
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a closed-end fund isn't it because you
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need a buyer and a seller in order to
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make a transaction well that's really
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one of the key differences you because
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you're actually trading the shares
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backwards and forwards on the stock
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market we call that closed ended and
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that means there's no disruption on the
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underlying portfolio so the fund manager
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doesn't have to be worried about you
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know being asked to get money back to
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invest as if they want to leave the fund
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and that's good because it means they
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can remain fully invested they don't
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have to just hold cash inside the
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funding case investors want an exit but
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it also means they don't have to just
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invest in things they can sell very
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quickly so one of the key advantages
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that they confessed in illiquid asset
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classes things like property or private
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equity which you know can be a little
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bit more risky in the short term but
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over the long term tens have a very
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strong performance record and talking
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them about performance you know there
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are some investment trusts out there
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that have been around for over a hundred
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years and have continued to deliver
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through market cycles unfortunately
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investment trusts don't seem to be as
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well known to the public as this
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performance history suggests they should
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be why is that I think there's two sides
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to that I mean there's there's sort of
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retail investors and I think one of the
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things about investment trusts they tend
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to be quite careful about how much money
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they spend on things like advertising
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and marketing etc and so they haven't
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tended to have the big
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appetizing campaigns that some of the
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other investment houses might do for
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their open-ended business I think that's
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one thing I think we're financial
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advisors concerns a much more specific
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reason until relatively recently
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financial advisors tended to be
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remunerated by the payment of commission
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investment trusts for various legal
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reasons couldn't pay commissioners
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freely and so they didn't and then if
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ever they tend to be ignored a bit more
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by the financial advice community and
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that's all changed now there have been
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changes to the rules the payment of
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commission has been banned all together
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and that's why in the last couple of
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years we've seen quite a big increase in
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the take-up by financial advisors in
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fact since those reforms came into place
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than the amount of recommendations of
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investment trust is more than doubled
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and you are direct general of the AIC is
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this one of your roles then to promote
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investment trust to retail investors
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yeah absolutely we have a variety of
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different roles we do a lot of work on
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the lobbying so I dealing with the
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mounting of regulation that comes down
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we give technical advice to all members
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but one of the newer areas that we've
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got involved in is particularly because
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of these changes to Commission we've
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been doing a lot of work training
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financial advisors and so giving them
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the education the knowledge so that they
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can now because they're not worried
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about the Commission issue they can
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actually have a have the sort of the
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understanding to feel confident about
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recommending them and we are seeing that
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beginning to happen but we also do the
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same with the retail investors you know
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we've revamped our website our consumer
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materials etc just trying to make things
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you know hopefully clearer and more
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simple and again we've seen a lot of
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increase in almost every month that goes
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by we've got a record number of people
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visiting our website and volumes in
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investment trusts hopefully that that's
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going to increase does that pose a
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problem or an opportunity for an
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investment trust manager um I think I
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think mostly it's an opportunity I mean
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it there has been the case in the past
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that maybe some some funds have been a
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little bit small in size you know one of
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the good things about investment
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companies is that as they grow they
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don't just keep charging the same price
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to the investor so actually most boards
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have independent board of directors and
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so what you see a lot of tiered rates a
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fee so in other words as they grow the
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fun gets relatively speaking cheaper for
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the investor so they have been growing
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and the last two years have been record
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years for fundraising so they've
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actually been able to get that scale and
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because of that scale they are actually
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passing some of the economies of scale
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on to the investor
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in other funds that have to say the
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price just remains the same no matter
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how fun big the fun gets and to be
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honest it isn't you know if our fun
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doubles in size it's not twice as
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expensive to run so I think that's a
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good thing for investors yeah thank you
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very much thank you very much this is
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Emma wall for Morningstar thank you for
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watching
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