A matter of trusts

The investment trust sector may be more than 150 years old, but it has not stood still. The types of trusts available to private investors have changed markedly over the years, and in particular, during the past decade. Perhaps the most striking development has been the huge increase in trusts that hold alternative assets — covering a vast range of non-equity-based investments such as infrastructure, renewable energy, property and debt.

In July 2019, total assets under management in this area exceeded £80bn, according to the Association of Investment Companies (AIC) — an increase of over 150% since 2009. Trusts focused on alternatives comprise around 40% of assets under management across the entire investment trust universe.

The growth of this sector has been fuelled by investors seeking higher income investments. But some of these trusts are higher risk as well as higher yielding, so investors must weigh these risks carefully when deciding how much to allocate to them — if at all — and which trusts to pick. While it is good that there is an increasing range of options on offer, as well as being higher risk than traditional trusts focused on mainstream equities, alternatives trusts invest in assets that are hard to understand so thorough due diligence is called for.

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