A direct offer

Investment companies deserve a wider audience. The good news is that they’re beginning to get it: the resurgence of closed-ended funds over the past five years has been a huge success story, with the sector skilfully exploiting regulatory change that has put it back on a level footing with their open-ended counterparts. Still, there is plenty of room for further improvement – which is why it’s great to see smaller funds making the effort to reach out.

Two investment companies have in recent weeks announced they are to run funding rounds through panels of intermediaries and fund platforms, explicitly targeting retail investors and their advisers with a direct offer. The fact that neither fund is a household name underlines the increasing confidence of the investment company sector.

First to the market is BB Healthcare Trust, run by Bellevue Asset Management, which has a decent track record since its launch a year ago, driving performance from a specialist portfolio of healthcare sector stocks. It is joined by the Aurora Investment Trust, where the offer is exposure to a concentrated portfolio of high-conviction stocks chosen by the fund’s managers at Phoenix Asset Management.

These are the type of funds that in the past would have been less likely to court the retail investor community. The issue is not that the funds don’t have the kind of past performance track record that might appeal to investors – both can point to attractive numbers – but that they are run by management firms that don’t have huge brand value or the deep pockets required to market effectively to a retail constituency. In times gone by, such funds would have worried about their ability to get the message across.

Now, however, the managers of these funds clearly have confidence that their performance track records – alongside the value of their investment approach going forward – will cut through to a retail audience. In other words, that they’ll be able to get their fund-raisings away even without the benefit of mega marketing campaigns.

The funds are capitalising on the work of those that have gone before them to raise the profile of the investment company sector – including its strong relative performance, low costs and attractive structures. Where once investors and advisers alike might have felt an investment company was an esoteric and inherently high-risk option – all the more so when managed by a relatively unknown firm – there is now sufficient awareness and understanding of what the sector offers for BB Healthcare and Aurora Investment Trust to be confident they will get a fair hearing.

There’s also a pleasing chicken-and-egg element to these offers. The more investment companies that run successful share issues through intermediaries and direct-to-consumer investment platforms, the more that awareness and understanding will grow. By targeting this wider investor group, both funds hope to secure greater liquidity and marketability, but they will also help those funds that follow in their footsteps with similar aspirations.

None of which is to say, of course, that investors should part with their money – that’s an individual decision to be made according to attitude to risk, personal circumstances and financial goals. But the important point here is that the choice will be made on the basis of what actually matters – investment appeal and appropriateness – rather than around the fluff of marketing and brand, which has so often dominated in collective fund sales.