Investment trusts are invariably a geared instrument. So, of course, they have out-performed during an emerging market bull run.

Come on Theo, you're much better than your post suggests. I have found IT's very easy to use and you do not need a broker if you wish to avail yourself of the various schemes run by the providers, although I now use a broker I do not pay a hefty quarterly fee at all as Hargreaves Lansdwon let's me hold IT's outside of the ISA for zilch and just £45 per year inside an ISA which is also their same fee for OEIC's.

IT managers are frequently assessed by commentators as well as forums whilst not one of my current crop of 9 IT's pays a performance fee, I've no idea where Theo got his rubbish from but as I say, it was a surprise to read his ill informed post on this occasion.

There is nothing wrong with sticking with OEIC's provided you are happy with the higher fees and lack of information regarding holdings. It is much easier to determine the holdings of an IT and easier to see the full extent of costs, of course this information is available for OEIC's but you won't find it in their publicity leaflets otherwise known as monthly fact sheets.

I do agree with Theo though that RDR has seemingly led to an increase in commentary about IT's, often they are the featured fund in Sunday's papers which is something that I rarely saw previously.

All the best,
Mickey
ps. My IT's on high discounts made 17% last month, not many OEIC's will have done that.

These days, with approaching RDR, we seem to be having a torrent of publicity of IT. I suppose the companies running them think it will be a bonanza time for them.

It is an undeniable fact that they beat the UT most of the time, especially in bull markets. But investing in them is full of problems and I doubt if many small investors will put up with them:-

- You must have a stock broking account and pay a hefty quarterly fee for it, whether you trade or not. Very expensive for some one starting with £1000 and many will resent it even with £100,000.

- Their managers are not assessed and are mostly unknown.

- One has to assess not only their performance over various periods, which is difficult enough, but also their gearing, premiums and discounts. A premium indicates you are paying above the odds, it may well fall. A discount means most investors think it is no good.

- Finally their complex charges with diabolical performance fees obscuring their effect.

These products were designed for institutional investors and are still only suitable for them. I am sticking with simplicity and UTs.

...and just to add to dlp6666's reply:

- even the 'unknown' managers are known to those that take the time to learn about investment trsuts.

- a discount might be seen as an opportunity: why follow the crowd that has already invested? Be a trend setter, not a trend follower.

- if anything is diabolical, it is your lack of understanding of investment trust charges, especially regarding performance fees - which are applied by a minority. And all fees and charges are diabolical only if the investor makes no effort to read the prospectus and annual company accounts (investment trusts are companies, and are subject to company reporting requirements). No different to unit trusts, in that respect.


The earliest trusts were designed for private investors. Unit trusts only came into being in the UK around 65 years after the first investment trust.

I invest in IT's using Alliance Trust Savings Ltd. Charges are the same as stocks but that can be as little as £5 whereas UT's charge up to 5%. Thats quite a difference when investing £1000. Annual charges are also modest. Also the TER on IT's are much lower so you get better performance.

Yes, they've got greater complexity - certainly discounts and premiums need careful research as to background reasons/prospects.

But ITs are not necessary overly expensive to invest in - e.g. small investors could go with Halifax's Sharebuilder (£2 per online scheduled trade - weekly bulked purchases, no quarterly fees).

Also - many managers ARE well known and also run parallel open-ended funds (which, probably because of higher charges, don't do as well as the ITs). More importantly, their performance IS assessed by a board of directors, who can replace them with better managers if performance is down.

The charges are actually usually much LESS than UTs - at least for the larger global etc. trusts.

One other point - if the market crashes, unlike those in open ended funds, managers in ITs aren't forced sellers of fundamentally good stocks they've bought for the long term, suffering temporary setbacks with the rest of the market - ITs can really take the long term view.

PS - vested interest declaration - I have smallish diversified holdings in around 80 ITs.