How investment trusts work

• A key attraction of investment trusts is their potential for a more consistent income.
• Unlike other types of funds, they’re able to retain up to 15% of their net income each year, which gives them the ability to smooth these payments over the years.
• For example, they may be able to ‘top up’ the income that investors receive in years when the portfolio’s income is lower than the average.

• Buying and selling an investment trust’s shares doesn’t mean the manager needs to make any changes to the portfolio itself, so managers can always focus on the long term.
• They don’t have to deal with significant inflows in good times or sell holdings they’d like to keep in times when investors are redeeming.

• Another benefit of the separation between the trust’s portfolio and the dealing in its shares is that there’s no need to maintain a cash balance to meet redemptions.
• This means the portfolio can be fully invested at all times.

• Investment trusts have the ability to access a wider range of investments (like unlisted companies) than many other funds. Plus, they find it easier to hold assets that are harder to buy and sell (also known as ‘illiquid’), as they don’t have to deal with money going into or out of their portfolios.

• By borrowing money (a process known as ‘gearing’), investment trusts can potentially boost returns, though it can also magnify losses — something Open-Ended Investment Companies (OEICs) cannot do.

Investment trusts give you the ability to invest in unlisted companies and private equity as well as assets that benefit from stable long-term investment, like infrastructure.

MultiManager investment trusts invest primarily in other investment funds and trusts rather than directly into individual stocks.

They provide an alternative to putting together your own portfolio of investment trusts, monitoring and making changes. They provide ready-made portfolios managed by expert fund managers.