Investment Trusts


For many clients investing directly into the stock market is too risky. We normally advise clients to invest via a collective investment, this can be a Unit Trust and OEIC or an Investment Trust. At Nicholls Stevens we have had experience of investing in collectiv investments for over 20 years. We are able to advise clients on the selection of all types of collective investments to form part of their portfolio

The advantage of a collective investment is that a fund manager is watching and adjusting the fund on a daily basis and you can be assured of a spread of investments within the set criteria of the particular fund

If you purchase an investment trust you purchase shares in a public limited company. However, rather than purchasing shares in a company that manufactures good or services, you have purchased shares in a company whose purpose is to invest in the shares of other companies. As it is a plc the price of the shares will be listed on the London Stock Exchange and the fund will be known as a closed ended fund because the company will have a limited share issue and the only way it can increase its share capital will be by a rights issue or loans

Your questions answered:

Can I achieve an income?

Yes, a large number of funds produce dividends

Can I have access to my investment?

Yes, the shares can be sold via a Bank, stockbroker, on line dealing service, or in some cases the Investment Trust Company itself offer a savings scheme.

What are the tax implications?

The trust itself pays no CGT but any dividends created will be subject to income tax. On a sale any capital gain could be subject to CGT depending on your other gains and losses in the year.

What about risk?

The risk of owning an investment trust is higher than an open ended investment because the price can go to a discount or premium to net asset value (NAV). Some investment trusts are highly geared that means they ave borrowed heavily to further invest in shares. This is a risky process which can go outstandingly well or badly depending on market conditions.

The investor also needs to be aware that the shares have to be sold in the market and in a falling market the price paid may be well below the true value of the shares

What about charges?

The cost of buying and selling and the management charge is usually  lower than a collective fund such as an OEIC.