While these are huge issues for the industry, Sayers says he gets most satisfaction from training advisers to use investment trusts – especially when they later invest.
“We have had quite a few advisers who had previously never touched investment companies. They have said, for example, that they have just bought their first property fund because they can see how a closed-ended structure makes sense for this asset class,” he says.
While the two AIC sectors to have received the most demand recently have been generalist in nature – UK Equity Income and Global – there have also been strong inflows into more specialist vehicles, including property, infrastructure and hedge funds.
This shift to higher-yield investments, says Sayers, is in part explained by the recent pension reforms that have unlocked potential investment capital.
“People want to see consistent income managed over a cycle, and preferably they want it to grow steadily and by more than inflation,” he says.
“Over 20 years, investment trusts have beaten the retail prices index, as well as doubling capital.” Undoubtedly, the most popular investment trust this year, indeed the largest ever launched, is from a manager who made his name from income investing.
Neil Woodford’s £800m Patient Capital Trust has put the spotlight back on the closed-ended space in a similar way to another high-profile manager, Anthony Bolton, who caused a stir with Fidelity China Special Situations in 2010.
Sayers sees this as a great endorsement for the sector, though he is keen to manage expectations.
“We do stress the word ‘patient’ in Woodford’s launch but, inevitably, there will be extra scrutiny. The novel charging structure will also shake things up a bit. From our perspective, it was great to see a name like that using the closed-ended structure.”
Patient Capital Trust predictably went straight to a premium, as have many of the specialist trusts that populate wealth managers’ portfolios.
So, are there any real bargains left for new investors in the closed-ended space today?
“We are always clear that just because something is on a big discount, it does not mean it is great value and, similarly, if there is something on a huge premium it does not mean you should not buy it,” says Sayers.
“The big driver of premiums is the fact these are funds that can offer a good level of income. If those premiums disappear, a lot of it will come down to whether or not the income carries on – which might be your primary concern.”
Hands-on approach
Sayers says the current boom in the closed-ended sector, both in performance and popularity, is the best it has been for some time.
But he is also aware it will not last forever. He reveals the AIC has already been in talks with boards to discuss how they would manage discounts should momentum in the sector take a different direction.
