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Lack of understanding is key factor in retail investors not choosing investment trusts


Nearly three quarters (74 per cent) of retail investors are aware of investment trusts against 83 per cent for unit trusts and 100 per cent for individual listed equities, a survey has found.

The poll of 500 retail investors with minimum investable assets of GBP25,000 also found that well over half of all investors (58 per cent) could not define how investment trusts differ from unit trusts, with 60 per cent of investors citing a lack of information and access as the reason for not investing in investment trusts.
The vast majority (67 per cent) of investors have not changed their opinion of investment trusts since the Retail Distribution Review, the survey by CFT Partners suggests.
The research revealed that the most influential arguments to persuade investors of the merits of investing in investment trusts are: the stronger performance of many investment trusts versus their open ended counterparts; the lower fees than charged by unit trusts and the credibility of investment trusts as an investment opportunity for long-term investors seeking income.
The stronger performance of many investment trusts versus their open ended counterparts rated as the most influential argument able to impact investor sentiment positively. Lower fees than unittrusts also rated highly as well as arguments that investment trusts are a credible investment opportunity for long-term investors seeking income.
Conversely, investment trusts’ ability to seize opportunities through gearing, and their better standards of transparency as listed vehicles were rated as less influential on opinion despite both being favourable attributes of the sector.
Annabel Brodie-Smith, communications director at the Association of Investment Companies, says: “This research shows that many investors still do not fully appreciate the many benefits of investment companies. Investment companies have strong long-term performance and have outperformed open-ended funds in fourteen out of sixteen sectors over the last ten years. They have an impressive record of dividend growth, making them the dividend heroes of the investment world.”
Adrian Flook of CTF says: “Each trust’s message will differ, but collectively trusts have to be aware there is still much to do to convince retail investors of the undoubted virtues and benefits of this asset class. This research provides the backbone for a successful and clear communications strategy for each trust as they seek to benefit from the freedoms offered by RDR.”

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