What are Investment Trusts?
An investment trust is a listed public company that invests in other companies and is quoted on a stock exchange. Investment trusts invest in a wide range of different assets such as the shares and securities of other companies that trade on the world’s stock markets. By investing in an investment trust you gain access to a wider range of investments that you could normally buy yourself. Your investment is also managed by a professional fund manager.
Investment trusts are 'close-ended funds' as there are a fixed number of shares and this number does not usually change regardless of the number of investors. The price of the shares reflects the value of the underlying holdings of the trust, but is also affected by the demand for the shares. For example, if there are more buyers than sellers, the share price tends to rise and vice versa.
Investment trusts are managed by professional fund managers who are accountable to the Trusts' Boards of Directors. The Directors are, in turn, accountable to the shareholders. Investment trusts are also subject to company law and the rules of the London Stock Exchange.
Benefits at a glance:
- Quality: professionally managed portfolio of shares and securities
- Independence: Board of Directors looking after shareholders' interests
- Cost-effective: less expensive than buying individual shares
- Convenient: access to a diversified portfolio within a single investment
- Flexible savings: investments can be made in small amounts via savings schemes
