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AITC tells all trusts to be explicit on gearing

Investment trust boards have been told by the AITC to go public on their gearing policy to end friction in the marketplace.

The AITC has written to members asking them to clarify levels of gearing in each trust.

Under FSA rules published one year ago, boards have to fully disclose investment trusts with significant levels of gearing.

But the AITC says friction has been created between firms with different understandings of what constitutes significant levels of gearing. It has been working with the FSA to clarify this but says confusion still exists.

This is despite AITC risk warnings that trusts invested directly into the market with no structural or underlying gearing and financial gearing levels below 30 per cent are not intended to be subject to the new rules.

Director general Daniel Godfrey suggests in the letter that boards could consider publishing an explicit gearing policy in the company&#39s accounts and on the manager&#39s website.

PR executive Jemma Jackson says: “If this policy were to indicate a maximum anticipated level of gearing that the trust would expect to take on in the foreseeable future, it would reduce the amount of work an adviser might need to do to decide whether the disclosures and warnings attached to significant gearing need apply.”


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