Forum Archive Index - May 2001

["Mike Hudson" <mikehudson@clear.net.nz>]

Gerry in his excellent piece on UK Investment Trusts said among other things

"G: There is no need to discuss the difference between these trusts any further! I favour the UK listed Investment Trust."

I agree with Gerry about Investments Trusts and use them extensively myself particularly to invest in markets in which I do not have the expertise to invest directly – Asia, Emerging Markets and Europe. However there are some down sides to consider as well.

• They are more volatile in that they usually sell at a discount to asset backing and the share price is affected by both the movement in the price of the underlying asset and also by the variation in the discount (sentiment)

• A number of the Trusts do have secondary listings in NZ but with the notable exception of FCT (the worlds oldest and largest trust) they are not very liquid. Investors in the main would be better off to buy on the London Exchange.

• The government, spurred on no doubt by the Unit Trust industry, has realised that there is an anomaly between the taxation treatment of Unit Trusts and Investment Trusts and it is under review.

• These days many Unit Trusts are free of entry fees although it is true that management fees tend to be higher.

 

A good site for exploring Investment Trusts is www.trustnet.com

Cheers

Mike H