Investment trusts: What they are and why we like them

Unit trusts are the most popular form of fund in Britain. But there’s an alternative that not only has a longer pedigree, but also a better record: the investment trust. James McKeigue explains what they are and what their advantages are.

Unit trusts are by far the most popular form of pooled investment vehicle in Britain. That's probably because advisers get juicy commissions for recommending them. Yet there's an alternative that not only has a longer pedigree, but also a better record: the investment trust.

The very first, the Foreign & Colonial, was set up in 1868 to give domestic investors a cheap, diversified way to tap growth in Britain's vast empire. The trust is still around today. Unit trusts came along a lot later and achieved their popularity largely by paying big commissions to financial advisers.

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BH Macro(LSE: BHMG)1,9451,9882,020-1.2%n/aUS-based hedge fund with good record
Personal Assets Trust(LSE: PNL)34,09035,13034,520+1.5%1.6%Defensive shares, gold and index-linked bonds
Scottish Mortgage Trust(LSE: SMT)642.5685774-11.4%2.0%Focus on stocks with long-term growth potential
Finsbury Growth(LSE: FGT)330378373+1.1%2.6%Strong record, focus on global businesses
RIT Capital(LSE: RCP)1,1351,1291,180-4.7%2.5%Investment vehicle of Rothschild family
3i Infrastructure(LSE: 3IN)123126121+4.6%4.7%Focus on high-yielding infrastructure assets
* Price when we tipped the trust on 12 June 2012 ** Price as of 9 November 2012
James McKeigue

James graduated from Keele University with a BA (Hons) in English literature and history, and has a certificate in journalism from the NCTJ. James has worked as a freelance journalist in various Latin American countries.He also had a spell at ITV, as welll as wring for Television Business International and covering the European equity markets for the Forbes.com London bureau. James has travelled extensively in emerging markets, reporting for international energy magazines such as Oil and Gas Investor, and institutional publications such as the Commonwealth Business Environment Report. He is currently the managing editor of LatAm INVESTOR, the UK's only Latin American finance magazine.