Last week I was up in Scotland at a conference aimed specifically, but not exclusively, at the investment trust community. Attendees included fund managers, board directors, chairmen of individual trusts, representatives from the Association of Investment Companies (AIC) and key industry figures from the world of investment trust research.
It was a fascinating experience on a number of levels, but what struck me hard was the average age of the attendees. I stress “average” because – as we know – there are always outliers, but I couldn’t get away from the apparent absence of an entire generation of participants from these vehicles.
There was a wealth of information and experience in that room, including some highly influential individuals (current and past). However, their shared bank of knowledge doesn’t seem to be passing down to new participants, as financial advisers have shied away from investment trusts since the split-capital trust scandal of the early 2000s.
Yet everyone with whom I spoke at the conference extolled the virtues of closed-end funds at the cost of open-ended funds. And cost is a key word here – not only do investment trusts tend to be cheaper than OEICs, but their costs are more transparent, too. So an investor can see clearly how the fees are comprised – a transparency that’s left wanting much of the world of OEICs.
Over the coming weeks and months, we’ll be creating a series of articles and presentations to help advisers demystify investment trusts and overcome their long-held fear that stems back from the split-cap debacle. Many investors have lost out on superior returns from investment trusts over the last decade and those who weren’t active in the market at the time are prone to fear of the unknown. We need to change this misconception that investment trusts are “damaged goods” and help the next generation of investors to consider for themselves where investment trusts have merit.
We need to change the attitudes at the board level, too. We want directors to embrace renewed interest from younger investors and we need them to impart their knowledge and help continue their path into history. After all, without the first investment trust in 1868, who knows how the industry would have developed?