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Investment trusts versus their sibling funds

Where, and why, to consider backing the closed-ended option
Investment trusts versus their sibling funds
  • Equity investment trusts might pose a mispricing opportunity versus open-ended peers
  • We analyse the actual differences between equity trusts and open-ended funds run by the same team

Having long graced the upper echelons of the performance charts, growth-oriented names such as Scottish Mortgage Investment Trust (SMT) appeared to finally hit the buffers last month. A tech sell-off, driven in part by rising inflation concerns, saw Scottish Mortgage shares fall by some 28 per cent between 15 February and 5 March. The shares briefly traded at a rare double-digit discount to net asset value (NAV) before staging a fierce recovery in the second week of March. Other growth-oriented names including Baillie Gifford US Growth Trust (USA) and Polar Capital Technology Trust (PCT) have had a similar ordeal – presenting tactical investors with a chance to buy in at wide discounts.

With inflation concerns still proving highly divisive, it remains impossible to predict how these trusts will hold up in the shorter term. But with some investors eyeing up possible bargains in the equity investment trust space it is worth revisiting another question: how do equity trusts differ from open-ended funds run by the same team? Understanding the similarities and differences can help you decide which might be the best match for your portfolio.

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