Investment trusts outperform unit trusts – here's why

Fidelity China Special Situations up over 25% in six months.

If unit trusts didn't exist, no-one would worry about investment trusts' net asset values or discounts. Does the average investor know or care what is the net asset value of (say) Diageo or Weir Group?

Too much concentration on discounts can lead to choosing investment trusts which underperform. It is by no means certain that a trust with a high discount will be able to close the gap between its net asset value and its share price - whereas the share price is what you have to pay to buy the shares in the trust. That's what I'd rather concentrate on, thanks.

Andrew -

But Aberdeen Asian Smaller Companies up 48% over the same six months - and it's got track record.

I might buy shares in Anthony Bolton's trust if it's still performing in three years' time . . . . .

Roger,

Good for you .Thats a great return.Early days at Fidelity.A good Investment Trust that covered only warrants in Emerging Markets would be a real winner over 2/3 years.

I'd like to know what disparity Winterflood found in performance between open-ended income funds and their IT equivalents.

UK Equity Income & Growth sector investment trusts have sold on an average discount of around 10% for most of the past decade. If you are primarily interested in nailing a high and growing income you can, for instance, currently pick up several old and solidly managed trusts on starting yields of almost 5% net.

Compare that with the returns on cash and gilt yields and it's strange that income seekers have not stampeded into the likes of Temple Bar, Edinburgh and City of London. The trouble is that ITs cannot or will not sell themselves, by advertising and through intermediaries, as noisily as their big OEIC equivalents such as Invesco and Newton. But which type of fund has the better yield or total return more of the time?

If you have ever tried to construct what I'd call long-term performance records for unit trusts, 10 years or more, you will know why comparisons with the more staid ITs are so difficult. OEICS keep merging, folding, altering their objectives to suit fashion, changing their names... while online data for such elementary stats as payouts per unit is remarkably elusive.

That absence by itself, compared with the stability and continuity of big investment trusts who always give 10-year records in their annual accounts, makes me suspect that the open-enders are shouting more loudly with somewhat less to shout about.

William

If you're interested in the research findings you can download the report from Winterflood's site (www.winsresearch.co.uk) - you'll need to register, then click on 'View latest research'. It's the 'WINS Monthly - October 2010'

Hope this helps

Rich

Why not just get a copy of What Investment??

Full tables published monthly for all OEICS & ITS-- 6 month, 1,3,5 &10 year periods covered.

Read these for a few months-- its a no brainer-- ITS all the way for virtually all the major sectors.

Also have done comparisons in the past where same manager runs both OEIC & comparable IT (eg. fid spec sits& fid spec vals )-- guess what the effect of a much lower annual charge does just what you would expect when compounded over time.

Do your homework and leave the fin advisors to seek their comissions elsewhere.

Follow the yellow brick road....

Anthony Boltons China trust unfortunately has been launched more for benefit of Fidelity's already too swollen coffers.

High annual charges plus outrageous performance fee make it in my opinion a poor choice for investors. When this is added to risks of single country fund in volatile area in present economic circumstances, and Bolton leaving in the near future, its performance may very well be rather like a poor OEIC.

Not a good choice compared to the other long established "proper" investment trusts in that area particularly from Aberdeen and First State.

can one purchase ITs through Hargreaves Lansdown?

I have been looking on the site and it is certainly not as obvious as for OEICs and UTs - perhaps because of not shouting as loud and not paying HL as much commission?

"If you're interested in the research findings you can download the report from Winterflood's site (www.winsresearch.co.uk) "

Only if you're an IFA, apparently. Not belonging to that elite, I shall have to take their generalisations on trust.

For what it's worth, you can get free information on investment trusts on Trustnet (http://www.trustnet.com/Investments/Perf.aspx?univ=T) or from LSE (http://www.lse.co.uk/share-prices.asp). The larger investment groups like Aberdeen or JP Morgan also have their own websites with information on their investment trusts.

There's no magic about investment trusts - they're just shares like Shell or Tescos or Marks & Spencer. Any online stockbroker will deal in them. I'm sure Hargreaves Lansdown will.

Yes, you can buy Investment Tusts with h-l.co.uk . Click on "Share Research and Prices" at the top of the home Page, insert the EPIC eg AAS or FCSS and Bob's your uncle.

Otherwise type name of Trust. Info. about buying is on the page.

Hi,

I am an IFA and love Investment Trusts! The industry is institutionalised to sell Unit Trusts historically thru insurance companies but that is changing over time as more and more IFA's make use of Platfroms/Wraps to administer their clients investments. ITs are widely available thru the likes of Transact.

One problem I have is finding research for ITS. It is not as comprehensive as for Units Trusts and the main reason is the IT company not subscribing to research websites such as Trustnet.