Eve Maddock-Jones, Investment Week, 09 August 2024:
The new Labour government declared that growth is at the centre of its economic mission and the investment trust sector has called for this vision to include swift changes to its cost disclosure regime..
Investment trusts are subject to the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation and the Markets in Financial Instruments Directive (MiFID), both adopted directly into UK law before Brexit and have led to investors being “misled” about the true cost of investing in closed-ended products, according to several commentators..
Investors in investment companies, which trade shares like any other public company, already benefit from transparent reporting, including detailed cost disclosure but under the current rules, institutional investors and intermediaries must report the costs again in their own disclosures to their clients, resulting in “double counting”, as MGIM’s Parfect called it..
The interpretation of these rules in the UK specifically has compounded the issue, and it is having a real-time impact in putting investors off UK assets.
James Carthew, head of investment companies at QuotedData, said investors were being “put off” using investment trusts because of the aggregate costs..
“We know that there are pressing problems to tackle with the nation’s finances, but unburdening the investment companies industry from its cost disclosure shackles could unlock a valuable route to raising finance for much needed investment in infrastructure and growing businesses,” Carthew said.
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