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Adviser Investment Trusts

Adviser investment trusts are an ideal solution for the first-time or smaller investor, providing the means to spread risks and rewards over a diversified portfolio of shares. With the potential flexibility to meet client demands ranging from children’s education to retirement income, an adviser’s investment trust propositions can combine requirements for security with aspirations for growth. Adviser-hub offers advisers useful information on their benefits for investors.

Investment Trusts: Index

>>A brief introduction



>>Measuring performance

>>Client objectives

>>Investment trusts & RDR

>>Investing for chidren


>>Preparing for RDR

Investment Trusts

What is an investment trust?Introduction

A brief refresher on what investment trusts are, how they can be used to help investors and the principal different varieties

What is an investment trust?

An investment trust is a public limited company and its shares are quoted on the stockmarket. An investment trust pools the money of individual investors and employs professional fund managers to invest this in a wide range of different companies. This means that even if someone only has a small amount to invest, they can gain exposure, cost-effectively, to a diversified and professionally run portfolio of shares.

An investor’s risk is also spread much more than if they were reliant on the success of just one company. If the companies the fund managers invest in do well, the value of the investment trust will grow, and so should the value of the shares in it. As well as investing in companies both in the UK and abroad, investment trusts can invest in property, bonds and cash.

How can investment trusts help investors?

Whatever an individual’s plans for the future, investment trusts can provide a low-cost and flexible way to invest.

  • First time investors: A global trust can be an ideal first investment, as long as an individual can commit the money for at least five years. It provides an instant spread of risk across some of the major world stockmarkets.
  • Going for growth: Younger investor might consider a specialist trust that focuses on growth, such as one investing in emerging markets. With longer investment time horizons, they can afford to ride out some shorter-term ups and downs from a more risky, volatile fund that has the potential for higher rewards over the longer term.
  • Investing for income: Income-paying trusts can be a sensible choice for people approaching retirement or already retired and who would like to supplement their pension. Over time, the income from these trusts has the potential to outpace inflation.
  • Saving for retirement: Individuals can invest in an investment trust through a personal pension or self-invested personal pension (Sipp). The type of trust chosen will depend on how close they are to retirement and how much risk they are willing to accept.
  • Investing for children: Investing now for a child could give them a better start in life in the years ahead. It is tempting and easy to put the money in a bank or building society account. But with a time span of up to 18 years, parents or others might decide it is worth taking more risk as the rewards could be much greater.

What are the main types of investment trust?

Each investment trust has an objective, with some aiming to maximise capital growth and others aiming for income while some may strike a balance between the two. All will clearly specify their investment objective to potential shareholders.

  • Global generalists: These are larger trusts investing in a wide range of companies on a global basis. Often viewed as a first step into investment trusts, they provide a cost-effective ready-made portfolio.
  • UK: Focusing on UK investments only, these can aim for income, capital growth or a combination of both.
  • Country and sector specialists: Investing in specific geographical areas, such as the Far East, Europe or Latin America, these are likely to be more volatile than global trusts as they do not invest as widely – although they could provide greater returns. Other trusts may invest in sectors such as smaller companies, property and financials.
  • Split capital trusts: These offer more than one type of share, to suit the differing needs of investors.

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AIC Training

Jacqueline Lockie, the AIC’s head of training, continues to run face-to-face and online structured training sessions for advisers on selecting and analysing investment trusts. The online sessions, which run for approximately one hour and include up to 20 minutes for questions at the end, are structured using the regulator's 2012 examination syllabus to provide training to at least level four. CPD certificates are available once you have attended the training sessions and sat the appropriate accompanying test.

To find out more or to register for training sessions, click here>>

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