Jackie Beard, director of closed-end fund research at Morningstar, is urging the investment trust industry to not throw away its competitive advantage in the run-up to RDR and give far clearer – and far more – information to its investors.
“For investment trusts to compete on a level playing field with open-end funds, where full holdings are disclosed monthly, they need to be more transparent – plain and simple,” she said.
“It’s not enough to produce a list of holdings just once a year. By the time that information is made public, through the company’s annual report and accounts, it is a few months out of date. Investors want to know where their money is being put to work. Advisers need to be able to monitor the risks to which their clients are exposed.”
In the firm’s latest research paper – Investment trusts: why transparency matters – she explains that just because there is no legal requirement for closed-ended vehicles to disclose its full portfolio listings is not a reason for them not to.
“Those investment trusts already disclosing full portfolios monthly are seeing benefits, as are their shareholders. For example, the funds are trading within tighter discount/premium ranges,” Beard added.
Frustratingly, she is still coming up against a number of barriers from the trust companies themselves, with around 80 funds still not releasing a full portfolio listing even once a year, accounting for £16bn in assets.
“We believe quarterly disclosure in full is a fair expectation from investment trusts, although we’d prefer monthly. Even with the advent of RDR, advisers need transparency to ensure their clients aren’t exposed to unnecessary – and avoidable – risk.”
