View more on these topics

Matter of trust

Investment trusts have several advantages over unit trusts. Most investment trusts have beaten inflation over the past 10 years – and many of them both in terms of income and growth.

The main reasons for this seem to be that most investment trusts have lower charges than most unit trusts, nearly all can be bought at a discount to their asset value and, because they are closed funds, they do not have to hold cash to cover possible redemptions.

Furthermore, unlike unit trusts they are allowed to retain up to 15 per cent of their investment income in a revenue or income reserve account so when dividends are rising fast they can put some aside to help them over periods when dividends are static or falling. Over 30 of them have, therefore, managed to increase their dividend every year for the past 10 years or so by dipping into reserves. So this type of trust makes an ideal investment for trustees. Over the past 10 years, for example, Glasgow income, which yields over 5 per cent a year, has more than doubled its capital value and with dividends reinvested has shown a total return of more than four times its original investment over the 10 years to October 1 2006.

Over the same period trusts such a JP Morgan Fleming Mercantile and RIT Capital Partners have shown similar results but have lower yields. There seems to be just one disadvantage that investment trusts have compared with unit trusts and that is that the discounts might vary and at times some well managed investment trusts’ share prices stand at a premium to their asset value.

Because of the stiff competition, and for higher levels of better publicity, some unit trust groups tend to hire the very best investment managers. Some of the groups who do this include New Star, JO Hambro, Artemis and Axa Framlington.

Recommended

Correspondent’s Week

This week by personal finance reporter at The Daily Telegraph Faith ArcherMonday marked my first day back in the office after a week in New York celebrating an old friend’s wedding.

L&G steps up pension drive with podcast

Legal & General has produced a pensions podcast to be broadcast as part of its continued drive to encourage their customers to consider contracting back into the state second pension. The firm is writing to its clients for the third successive year to ask them to consider their options and will guide them to the […]

Equity release sales creeping up, reveals Ship

Equity release sales rose slightly during the third quarter of the year. Figures from Safe Home Income Plans show its members wrote £295.1m in that period, an increase of 12.3 per cent on Q2 2006 but only 0.51 per cent ahead of Q3 2005. This contributes to an annual rolling year total figure of £1.13bn […]

Which? says FSA is leaving public at risk over PPI

The FSA’s failure to name and shame the companies profiteering on payment protection insurance will result in consumers being put at risk for at least another year, warns Which? Which? has called for quic- ker action after both the Off-ice of Fair Trading and the FSA released damning rep- orts into PPI last week claim- […]

India GDP surprise

By Kunal Desai, head of Indian Equities, Neptune Kunal Desai, manager of the Neptune India Fund, comments on the strength of India’s latest GDP figures. Click here for more Important Information Investment risks The Neptune India Fund may have a high volatility rating and past performance is not a guide to future performance. The value […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment