If investment trusts wanted to shout about the merits of the closed-ended structure, they’ve had two excellent opportunities of late, with the Woodford gating and a similar episode for several property funds following the 2016 EU referendum result.
However, they’re not typically shouters when it comes to marketing, relying on fairly sophisticated self-directed investors who are often huge advocates, and upmarket clients that hold them through their discretionary portfolios.
Investment trust boards are becoming aware that a significant proportion of their share capital – often over 25% these days – is held via platforms, typically of the direct (D2C) variety. Hargreaves Lansdown, for example, is a top ten holder of 5 of the 10 largest investment trusts.
How did that happen and who are the end consumers behind the nominee accounts lurking on share registers? We’ve looked at this within our UK D2C Market Update, which we are publishing today.
It’s important to note that we don’t think we are seeing the emergence of a new breed of digital millennial investment trust shareholders. It’s the same savvy, wealthy self-directed investors we’ve seen in the past. It’s just that this time they are using different services. The telephone-based stockbroker has been replaced by the digital platform.
We’ve also seen the demise of the ‘manager savings scheme’ where fund groups provided D2C access to their products. Platforms do that job better and most asset managers have now offloaded their schemes to the likes of Hargreaves Lansdown, Alliance Trust Savings and the Share Centre.
If investment trusts are to extend their influence in the D2C channel they will need to find ways to engage with consumers and get their benefits across to them. Doing this through content in partnership with platforms will be important.
They also need to get more representation on select lists which are key to distribution but don’t typically include investment trusts. With select lists under unprecedented scrutiny, and the suitability of open-ended funds for holding illiquid assets under question, now might be the time to make their case for inclusion.