A wealth of research available on investment trusts – shame about the regulation

David Prosser examines the various information resources for trust investors.

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Whether you’re pleased that Rishi Sunak has now set a date for the General Election will probably depend on your political views, but one side effect of the announcement is unfortunate. The current government will not now have the parliamentary time to make good on promises to fix a loophole in the law that puts investment trusts at a disadvantage over cost disclosures. That’s a real shame, since we’ve come so far in ensuring that investors interested in investment trusts get all the information they need to make informed choices.

Ironically in this regard, the Prime Minister sprung his election surprise in the same week that Citywire, the online investment analyst, announced a major expansion of its ratings coverage. Citywire, widely followed by retail investors, will now include investment trusts in its ratings, which look at the performance of funds in the context of the amount of risk they take.

Citywire’s new investment trust service covers more than 50 portfolio managers running funds across 30 sectors of the industry. Managers are rated on a scale, with the top performers – those with the best three-year risk-adjusted performances – awarded an AAA mark.

It’s the latest example of an ongoing expansion of the information and support available to investors with an interest in investment trusts. A decade ago, investors who wanted to explore investment trusts had relatively few options for doing so. Today, by contrast, there’s a huge range of information and analysis available for investor research.

“A decade ago, investors who wanted to explore investment trusts had relatively few options for doing so. Today, by contrast, there’s a huge range of information and analysis available for investor research.”

David Prosser

David Prosser

Some of that comes from publishers such as Citywire, which is focused on a broad audience. Other research comes from specialist City firms and analysts that have typically targeted professional investors, and much of that research is now available on the AIC’s own website. Indeed, the AIC has recently announced a significant expansion of the amount of third-party research it publishes.

The shifting attitudes of the major investment platforms is also welcome. There was a time when many of the most popular investment platforms didn’t even allow users to buy closed-ended funds. Today, they all make it straightforward to do so. In some cases, buying investment trusts is actually cheaper than buying open-ended funds because of the way the platforms’ charges are structured. The AIC’s online guide to buying through a platform, also updated recently, is a useful place to start for those who want to compare and contrast providers.

Similarly, most of the platforms now include selections of investment trusts in their lists of recommended funds. If you prefer to invest in funds picked out as likely top performers by the likes of Fidelity, Hargreaves Lansdown and Interactive Investor, there is no shortage of investment trusts to choose from.

All of which makes it even more disappointing that the regulatory confusion surrounding cost disclosures has been allowed to persist for so long – and that there will now be further delays in resolving the problem despite cross-party support for change. Effectively, the current regulation on the information that investors must be given about charges means they are being misled about the true cost of investment trusts compared to other funds.

We can only hope that the next government – whoever it is – moves quickly to resolve the issue. In the meantime, we should at least welcome the continuing expansion of the resources available to both existing and potential investors in investment trusts. There has never been more support available.