Can you afford to ignore investment trusts?

As this year has decisively shown, says Max King, the simplest route to outperformance has been via investment trusts. Here’s why you should invest in them.

FTSE indices
The simplest route to outperformance has been via listed investment trust
(Image credit: © Bloomberg via Getty Images)

The relentless growth of passive (or index) funds – invested according to the composition of an index without regard to the quality, value or prospects of their constituent companies – has put active investors into a spin.

The problem is that most active investors aren’t very good at picking winners. As a result, on average, active funds underperform their indices. Much of this is due to the costs of active management, although it is often forgotten that the costs of passive funds – while low – are not zero, so transaction costs mean that many passive funds also mildly underperform.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.