Morningstar survey reveals large investor appetite for the closed-end fund

4 May 2012

Investment trust discounts and gearing not deterring investors after all.

Morningstar has released the results of its first online survey of UK investors into the interest, understanding and use of investment trusts, with the overwhelming majority of participating investors interested in closed-end funds and undeterred by the added considerations of discounts and gearing. 533 investors participated.

Key findings from a report issued today include:

  • 60% of investors consider discount an important feature of investment trusts;
  • Fewer than 25% of survey respondents cited gearing as important;
  • More than half of respondents—54%—consider regular dividend flow important;
  • Nearly half of the participants—44%—want access to alternative asset classes through their investment trust holdings, such as property and private equity;
  • Nearly half of respondents—43%—first heard about investment trusts through a newspaper or magazine article; just 3% had first heard about investment trusts through an asset manager’s advertising.

Jackie Beard, director of closed-end fund research at Morningstar UK comments:

“The findings of our first survey simply don’t match what we’re hearing from the industry. For some months now we’ve been hearing of reluctance to recommend investment trusts because of their complexities and a fear that investors are put off by the additional considerations of gearing and discounts to net asset value. But the results of our survey show very clearly that this isn’t the case among private investors managing their own portfolios. These investors are not stymied by the unique characteristics of investment trusts and, while the majority consider discount to be important, they don’t see it as a deterrent. Our survey respondents are making it clear that investment trusts should play a part in their investment portfolios.”

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