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The rise and rise of investment trusts

At long last investment trusts are on a par with open-ended funds and that’s great news for advisers and investors alike, says Annabel Brodie-Smith, communications director, Association of Investment Companies

The arrival of RDR has put investment companies on a level playing field with open-ended funds. The AIC team has been providing training for advisers on investment companies for the last couple of years and we’ve had some interesting feedback from these advisers.

It’s clear that those who are targeting high net worth clients see great value in having a sound knowledge of investment companies as this client base expects it. These advisers are also interested in a much wider range of investment companies than initially expected.

There was a time when the conventional wisdom was that advisers, post RDR, would only be interested in the largest, most liquid plain vanilla investment companies in the UK or Global sectors. In fact, nothing could be further from the truth. Though there is interest here, of course, advisers have recognised that the closed-ended structure is ideal for investing in less liquid asset classes such as property, infrastructure and private equity.

But I think there is something deeper here than just the suitability of the closed-ended structure for illiquid asset classes. Advisers know that in this post RDR world they are going to be under pressure to justify their fees to clients, some of whom will be seeing the true cost of advice for the first time. Many people are predicting a rise in the self-directed investor as a result and there will no doubt be enterprising firms looking to provide solutions to help them do this.

One way to ensure investors stay with their adviser, 
is to offer something that clients can’t get, or don’t feel comfortable getting, via the self-directed route. Clients may feel perfectly comfortable buying a portfolio of tracker unit trusts via an online broker but may well feel the need for advice when this can help them explore 
the long-term benefits of less mainstream asset classes within an investment company structure as part of a well-balanced portfolio.

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