Investment trusts (ITs) make up a large slice of the UK’s listed stocks, with more than 450 listed in London spread across 70 discrete market sectors with an aggregated market value of around £325bn, with four listed on the FTSE 100 and more than 50 on the FTSE 250. They have been around as a class of investment vehicle for more than 150 years, yet many people are likely to be unaware of or less than fully informed about them.
Like a unit trust or other fund investments, ITs are a pooled investment collective that allow investors to achieve diversification (typically meaning lower risk) in a single investment. They have a live price that is connected to the underlying asset value of the investments and can be readily traded/liquidated by private investors. So they sound like other investment funds, and this raises the question of why they need to exist at all. Surely investors wanting to buy a focused investment class, ready diversified would just buy a fund fulfilling their objectives from one of the big-name investment houses? Quite right, but there are a number of key differences that make ITs potentially a lot more interesting and attractive.