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Continued naivete still surrounds investment trusts

I am no apologist for the investment trust industry but I was bemused by the comments of John Kelly, head of Abbey multi-manager development, in Money Marketing recently.

There can be some difficulties, yes, with invest-ment trusts but it is up to the dynamic multi-manager, such as Milton Investment Management, to take advantage of the anomalies when trading rather than buying blind.

We have enjoyed tremendous success from our investment trust portfolios -not that we are purely investment-trust-orientated – we shall look at whatever offerings are available to buy what we believe best suits our requirements at the time. Sadly, the comments suggest a continued naivete and lack of understanding of the properties of investment trusts.

Consequently, should I say therefore that this will ensure wonderful opportunities will continue to persist for investment managers such as our firm’s multi-manager offering or does it mean that the hordes will flock into them when it is too late, buying on the back of premiums rather than the present rapidly diminishing discounts? Of course, then we shall be selling our investment trusts to feed the quacking ducks.

Little attention seems to be given to the problems of dealing in unit trusts – no knowledge of price, delayed settlement and problems of being out of the market for a period before being able to recommit capital – a crucial factor when markets have been so volatile – and the fact that pricing bases can be moved against the investor.

The cynic would suggest, too, that higher fees, commission, initial marketing allowances and other deductions from the average fund come into the equation as well. I must admit to wondering how the average “platform” is ever going to be able to cover its costs unless annual management charges on those increase to compensate.

Philip Milton
Barnstaple, North Devon


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