Investment trusts: the best way to get good value from the City

If you’re going to pay someone to try to beat the market on your behalf, then this is the way to do it

LONDON, ENGLAND - FEBRUARY 18:London's financial district, known as the Square Mile, is dominated by sky scrapers on February 18, 2014 in London, England.(Photo by Peter Macdiarmid/Getty Imag
(Image credit: 2014 Getty Images)

We tend to be sceptical of the ability of fund managers to justify the amount of money they cost. The point of investing in an ‘actively-managed’ fund is for the manager to give you a better return (after costs) than you could have got by buying a ‘passive’ fund that just tracks the underlying market instead. Trouble is, few active managers manage to beat the market consistently over the long run and, to add insult to injury, they charge you handsomely for the privilege.

However, there’s one type of fund that can deliver market-beating returns on a regular basis – if history is anything to go by. We’re talking about investment trusts. These are stockmarket-listed companies that exist to invest in other companies – effectively, they are funds that are floated on the stock market. Figures from stockbroker Canaccord Genuity show that, in the five and ten years to the end of 2013, investment trusts in 14 out of 16 sectors examined beat their ‘open-ended’ (unit trusts and OEICs) fund rivals, often resoundingly.

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