When the idea thatcommission paid to investment advisers by unit trust companies was to be outlawed by the Retail Distribution Review(RDR) was first announced, the investment trust industry was thrilled. Why? Becauseindependent financial advisers(IFAs) tended to ignore investment trusts even if they had performance histories significantly better than their equivalent unit trusts on the basis that they didn't get paid for suggesting them to clients.
The hope was that when they didn't get paid for recommending unit trusts either they might become a little more even-handed. That looks like it will happen (surveys regularly show IFAs getting keener on investment trusts).
But it doesn't mean that the whole industry will benefit equally. There is bound to be a rush towards the very big, very liquid and very good trusts Neil Woodford's Edinburgh Investment Trust being the obvious one to point to here. But what of the small trusts?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
If they have under £100m under management they generally aren't very liquid ie, it isn't that easy to buy and sell them. They also tend to come with large discounts, something that can put both big and small investors off. With this in mind I am interested to see some movement at the Troy Income and Growth Trust.
I interviewed its manager Francis Brooke in the magazinea couple of months agoand we are fans both of Troy as a whole and of this trust it is up over 100% in the last three years against a rise of 50% in the FTSE All Share. But it is still a small trust.
Assets under management are currently around £80m - £20m short of the level that IFAs think they need a trust to be before they will put their clients into it. That's about to change. The Albany Investment Trust announced today that it is to reconstruct itself, giving investors the opportunity to roll their money into TIGT without incurring capital gains tax.
The Grampian Investment Trust (which Troy already runs) has announced the same. Albany currently has about £30m of net assets and Grampian has about £10m. Assuming the majority of shareholders accept the rollover and why shouldn't they given Brooke's excellent performance? this will push TIGT nicely over the £100m level.
This is pretty much good news all around. Current TIGT investors will be pleased at the rise in liquidity that comes with a rise in the size of the fund and by the fact that the fixed costs as a percentage of their holdings will fall, while Albany and Grampian shareholders will be getting out ofsmall funds trading at nasty discounts into a bigger one trading at par or a premium. TIGT has been the best performer in the income and growth sector in the last three years. Albany has been the worst. It all makes sense.
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
