Guide to Investment Trusts
Hellen Dalton
Hellen Dalton
Senior Investment Manager

In the search for diversification and risk reduction, collective funds have grown in popularity with clients over the last few years. Funds are an excellent way for investors to gain access to global markets or to a specific asset class and niche sector in a cost effective manner. Clients can invest with specialist fund managers that have expertise in healthcare, technology or geographical regions as well as alternative assets classes such as private equity or infrastructure.

There are a number of different structures for collective funds. Investment trusts are unique in that they are structured in a similar way to a company, with a fixed number of shares in issue. This differs from other collective funds where the number of units is flexible, and units are added or removed according to demand. Other distinctive properties of investment trusts include:

Closed ended
The shares of investment trusts are listed on a stock exchange with the share price subject to supply and demand. This means that during volatile markets the share price can vary markedly from the underlying net asset value (NAV) of the fund. Where the share price is less than the NAV it is called a discount, and a premium when above.

Ease of Trading
Investment trusts trade every day throughout the day, like shares. Other collective funds only trade once a day. This means that the holding is liquid in normal market conditions. There can be constraints if markets are particularly volatile, especially if the fund invests in more illiquid investments like property or private equity. For Euro investors there is an element of currency risk as many investment trusts are GBP denominated.

Predictable Income
Income focused investment trusts can build up an income reserve which can be used to smooth out dividend payments during points in the cycle where companies cut dividends. Other collective funds are subject to strict income distribution rules and are not allowed to build up this type of income buffer. This has proved to be a valuable characteristic for investors who are reliant on income. Certain investment trusts have a long history of increasing dividends every year despite the wider income environment.

Tax Treatment
Capital gains from investment trusts are taxed in much the same way as direct equity rather than the more onerous fund tax*. Investment trusts can be subject to stamp duty depending on where they are listed. There is no minimum holding period or exit tax.

* Cantor Fitzgerald Ireland does not provide tax advice. You will need to speak with your tax or financial advisor.

Highlighted Investment Trusts
Investment trusts cover a wide range of sectors, regions and assets classes. The below features some of our preferred funds in GBP:

Trust Focus Size Ter Yield
HICL Infrastructure Direct infrastructure assets, majority UK based. £2.8bn 1.1% 4.9%
RIT Capital Absolute return investment fund targeting returns of inflation +3% pa. £2.9bn 0.66% 1.6%
Polar Capital Technology Trust Technology companies from around the world. Large, mid and small cap. £1.7bn 1% 0%
JP Morgan Emerging Markets Companies based in countries including China, India and South Africa. £1bn 1.1% 1.3%


Investment trusts offer clients an excellent opportunity to access specialist sectors, alternative asset classes and niche markets that might otherwise be out of reach. If you are interested in learning more about investment trusts, or you would like to speak with a Portfolio Manager or Account Executive today, please phone the Cantor Fitzgerald dealing desk on 01 633 3633.

Warning: Past performance is not a reliable guide to future performance. The value of investments may go down as well as up. Not all products are necessarily suitable for all investors and specific advice is required before entering into this product.