The proportion of wealth managers who go off of their buy list to purchase investment trusts each month has nearly tripled in the past year, with most citing attractive discounts, according to the Association of Investment Companies (AIC).
While a 2023 survey found that 7% would go off buy list monthly for a trust, this year, the percentage increased to 20%. And while attractive discounts were the motivation for 82% of those surveyed this year, this is a slight downtick from last year, when 93% cited discounts.
The pricing has led some firms to jump on the opportunity, with one respondent claiming a “swathe of activity” in the past months to exploit discounts in the sector.
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On average of those surveyed, firms held 26 trusts on their buy list, but used just half of them with clients. They were most heavily featured in bespoke portfolios, with 92% including an investment trust, compared to inclusion in just 42% of fund of funds.
Nick Britton, research director of the AIC, said: “At a time when centralised investment propositions are exerting more of a stranglehold on wealth managers’ investment decisions, it’s encouraging to see that many individuals are able to go off buy list in pursuit of attractive opportunities for their clients.
“Wide discounts are still by far the main reason that wealth managers are looking to increase their exposure to trusts, but this year we have seen that factor diminish in importance and other traditional advantages come to the fore, such as strong performance and access to alternative assets.”
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While wealth mangers have increasingly purchased investment trusts off their buy list this year, the allocation to trusts in portfolios has fallen from 18% to 14%. While the majority (56%) of respondents expect no change in their amount of investment trust business in the next six months, 32% expect it to increase.
Toby Finden-Crofts, CEO of Research in Finance, said: “It is clear centralised buy lists are used extensively by wealth managers and discretionary fund managers. But to take advantage of the opportunity investment trusts offer, investors are increasingly using funds which sit outside of the buy lists.
“Our research shows that it’s not only the structural benefits of the products that are appealing but the access to some interesting and less accessible markets, such as private equity, infrastructure and renewables.”
