Wealth managers have become more positive on investment trusts with improved performance and a resolution of cost disclosure problems leading to better sentiment, according to a study by Research in Finance.
A survey of 158 discretionary fund managers (DFMs) investing in trusts on behalf of financial planners and advisers found 28% expected to write more investment trust business over the next six months.
With just 9% expecting to write less business in listed closed-end funds, that equated to a net score of +19%, which was up from +15% last year and close to the all-time high of +20% seen in 2022 and 2024.
Although the key reasons for using trusts more were the same as last year, the numbers citing them had changed, said Research in Finance.
Attractive discounts were mentioned by 56% of respondents, down from 68% last year after the average gap between investment trust share prices and the net asset value of their investments narrowed from 14% to 11%.
Strong performance was mentioned by 51%, up from 39% a year ago and the highest percentage of DFMs citing this factor since 2019.
Over a third, or 36%, said they used trusts to access specialist areas.
Improving liquidity and cuts in management fees both drew in 29% of respondents, rising from 22% and 15% respectively last year and their highest since 2019.
In terms of favoured sectors, 44% of DFMs tipped emerging markets to do best over the next 12 months, followed by 37% who backed technology and 32% who liked the US.
Oliver Crawford, research manager at Research in Finance, said: “While wealth managers have long acknowledged the value of investment trusts, concerns about liquidity and cost disclosure have been important barriers to further use. Our research shows that wealth managers are becoming more positive on both these fronts.”
Nick Britton, research director of the Association of Investment Companies (AIC), said: “The investment trust landscape has been changing rapidly, with the average trust becoming larger and more liquid. This research suggests that these changes have been welcomed by wealth managers, who mention stronger performance, better liquidity and lower fees as reasons for using trusts more. Although discounts have narrowed, they’re still a key attraction for those looking to use trusts more in the coming months.”
