Give trusts a better show

It has taken years – far too many years – for fund platforms to feature investment trusts. Research commissioned by the Association of Investment Companies into the availability of trusts on platforms showed a number of barriers to investing in closed-end funds for financial advisers. Although IFAS are investing more in investment trusts, allocating £990 million of their clients’ money into them last year – up 46 per cent on 2016 – this is dwarfed by the £65.8 billion invested by advisers in rival open-ended funds in 2017.

The research found an “inherent market bias” against investment companies due to advisers outsourcing investment to “discretionary fund managers” that do not use investment trusts. This comes five years after the retail distribution review, which was supposed to remove a commission bias and encourage a level playing field for investments, but still 95 per cent of assets on advised platforms “are still in openended funds or cash”.

AIC chief executive Ian Sayers says competition between different types of investment product is vital for a healthy market and investors should be encouraged to consider trusts, which have returned 165 per cent over the past 10 years, compared with 108 per cent for the average open-ended fund. Despite the attractive returns, Sayers said platforms can be a “barrier to the use of investment companies”. This is especially true in the independent financial adviser market where platforms’ pricing structures “can make it less cost-effective to hold listed funds… The FCA should ensure its further work on this topic considers whether platforms facilitate or frustrate competition between different fund types”.

Equity allocation

has fallen while growth and profit expectations have slumped