Standard Life Investments

Investment trust key features

Investment trusts have a closed-ended structure, meaning there’s only a limited amount of shares for sale. So when investors buy and sell these shares, the trust’s underlying portfolio isn’t affected. Consequently, the fund manager has more opportunity to take longer-term investment decisions. With an investment trust, fund managers are also able to borrow money, or ‘gear’ their portfolios to exploit a favourable purchasing opportunity without having to sell existing investments. Lastly, since investment trusts are companies listed on the stock market, they must have independent boards of directors directly answerable to the shareholders (that is, the investors).

Summary of benefits

  • Investment trusts’ fixed capital structure gives managers the ability to take a longer-term view on the investment opportunities available.
  • This works for any asset class, but is particularly attractive for those where market liquidity may be more limited, like small or mid-cap stocks, private equity or real estate.
  • The ability to take on debt to invest in the underlying portfolio can further enhance investor returns if asset prices are rising.
  • Possible share price premia or discounts to the true underlying value of the Trust portfolio can act as another form of inherent gearing, allowing investors to benefit from additional upside should a discount, for example, close.
  • The ability to smooth dividend payments means investment trusts can maintain or grow dividend payouts even during periods of market volatility and weakness.
  • Lower fees make them potentially cheaper alternatives, ensuring that more investor capital is exposed to the underlying investments.
  • You can gain access to our professional expertise, across a range of asset classes and with different income or growth profiles.

Investors should decide if an investment trust suits their needs and risk tolerance, and if so research which trust best suits their investment objective.

Read our Capabilities Brochure for more information on investment trusts in general and the Standard Life Investments’ trust range in particular.