Investment trusts explained
One of the oldest types of investment fund around, investment trusts offer some unique benefits.
What is an investment trust?
An investment trust is a type of investment fund. It is structured as a public limited company – or PLC. Its shares can be bought and sold on the stock exchange, just like other public limited companies. Investment trusts have been around since the 1860s, making them one of the oldest types of investment fund around.
Investment trusts look to make returns for their shareholders by managing a portfolio of investments. Every investment trust has a formal investment objective which details which markets or sectors they invest in. The objective will also indicate if the trust aims to deliver capital growth, income or a mix of both.
What are the features of investment trusts?
What are the benefits of investment trusts?
- A team of professionals to choose investments on your behalf
- A ready-made portfolio holding a range of different investments which can help spread risk
- A clear investment objective – so you can choose which trust is right for you
- A price that can (usually) be tracked daily so you can follow your performance
The board oversees shareholders’ interests, including ensuring the investment manager is delivering on the agreed objectives and that charges are competitive.
As with all public companies, shareholders can attend annual general meetings and propose and vote on issues.
Shares can be bought and sold daily even if they hold ‘illiquid’ investments like property or shares in private companies
Trusts can hold back some of their investment income year to year to help smooth out future ‘dividend’ payments.
Trusts can borrow money to invest if they wish. This can boost potential returns – but can also increase magnify losses.
Investment trust shares trade (and their price changes) throughout the day – not once a day like other funds.