Private investor sentiment towards investment trusts improves
Private investors who use investment trusts are more positive about them than they were a year ago, according to an annual survey conducted by Research in Finance.
Private investors who use investment trusts are more positive about them than they were a year ago, according to an annual survey conducted by Research in Finance.
Three-fifths (60%) of investment trust users described themselves as “fans” in the most recent wave of the survey1, preferring trusts to other kinds of investment. This compares to 55% the year before.
However, the percentage of “fans” is still below the 2021 survey when it hit a record high of 64%.
In the most recent survey, 25% of investment trust users said they were “agnostic” about the vehicles, while 15% saw them as more specialist and only used them from time to time.
Source: Research in Finance
The average age of respondents to the survey was 63, with “fans” being slightly older at 65 than non-fans at 61. Fans hold an average £305,000 in trusts, representing 56% of their total portfolio; the comparable figures for non-fans are £105,000 and 23%.
The biggest perceived benefits of investment trusts over other kinds of fund, such as OEICs, include the fund manager not being forced to sell to meet redemptions (68% of respondents), being able to buy or sell shares in investment trusts quickly (57%), dividend smoothing (55%) and long track records of dividend growth (49%). Only 3% of respondents saw no benefits in investment trusts over an OEIC.
A third of respondents to the survey (33%) expected to invest more in investment trusts over the next six months, with 57% expecting to invest the same and 9% less.
Among those looking to invest more, the top reason was attractive discounts to net asset value, mentioned by 85% of respondents. The percentage of respondents naming this as a reason to invest more has climbed rapidly from 68% in the previous year’s survey and 45% in the 2021 survey.
Other reasons to invest more included good/reliable dividends (49% of respondents), a more favourable view of investment trusts generally (44%) and the opportunity to increase exposure to more specialist areas (33%).
“The survey suggests that a lot of seasoned private investors have been grasping the opportunity to buy their favourite investment trusts at wide discounts, boost their income or increase their exposure to specialist areas which are hard to access in open-ended funds.”
Nick Britton, Research Director at the Association of Investment Companies (AIC)
Nick Britton, Research Director at the Association of Investment Companies (AIC), said: “It’s encouraging to see sentiment towards investment trusts improving towards the end of last year, with more respondents describing themselves as fans than we saw in 2022. Clearly, the benefits of investment trusts are well recognised among this group, including the fact that they are not forced sellers of assets into down markets. The survey suggests that a lot of seasoned private investors have been grasping the opportunity to buy their favourite investment trusts at wide discounts, boost their income or increase their exposure to specialist areas which are hard to access in open-ended funds.”
Abbie Hines-Lloyd, Senior Research Manager at Research in Finance, said: “This wave of our survey captured an increase in positive sentiment for investment trusts as discounts were bottoming out towards the end of October. It is evident that investors allocate higher percentages of their portfolios to investment trusts over time; they watch their trusts outperform other investments and offer a greater degree of diversification, all within a vehicle that is closed-ended and run by knowledgeable managers and independent boards. There are clear opportunities for the industry to engage with investors to build their confidence and knowledge about investment trusts.”
A note on the survey
The figures in this release are from the UK Investment Trust Study (UKITS) conducted by Research in Finance. For more information about UKITS, see ‘Notes to editors’ below or contact Research in Finance at [email protected].
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Notes to editors
- The UK Investment Trust Study (UKITS) is conducted by Research in Finance among private investors and wealth managers who use investment trusts. A quantitative survey of private investors is conducted annually as part of the study, and there have been eight waves of this survey since 2016. The fieldwork for the most recent wave of the private investor survey took place between 23 October and 4 November 2023 with a total of 216 respondents.
- The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 336 members and the industry has total assets of approximately £267 billion.
- For more information about the AIC and investment trusts, visit the AIC’s website.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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