A recent comparison of open-ended funds versus closed-ended investment companies suggests the latter are losing their edge on charges, but compelling reasons remain to opt for investment trusts, writes Jennifer Hill.
Investment trusts have long been seen to offer superior performance to funds thanks to their ability to ‘gear’ investments, hold a fixed pool of assets to smooth returns and charge historically lower costs.
Over the longer term, this still holds true: investment trusts, which are closed-ended in nature, outperformed open-ended funds in 13 out of 16 comparable sectors over five years, and 11 out of 16 over 10 years, data from stockbroker Winterflood Securities shows.
However, over the shorter term, they no longer have the upper hand. Over one year, investment trusts outperformed their open-ended equivalents in just half of the 16 comparable sectors. The data is based on investment trust share prices, which can trade at a discount or premium to their underlying net asset value (NAV), and Winterflood stated widening discounts had negatively impacted several sectors in the 12 months to the end of February… read more here