Investment Trusts

Investment Trusts are typically Limited Company or Trust structures that pool together a fixed number of shares and on issue the shares are purchased by retail and institutional investors. They are therefore categorised as closed ended funds.

These Investment Trust structures are able to invest in a wide variety of investments and companies, which most retail investors & Institutional cannot access. The Investment Trust will have board of non-executive directors and the fund itself will be managed by a professional fund manager and their team of analysts.

Investment trusts, are traded on stock exchanges as a public company (PLC), where, the main difference from open ended funds is that the various share classes within the Investment Trust have a different tax treatment relative to open ended funds, (often less punitive), and they are able to borrow money to invest, which is also referred to as ‘gearing’.

An approved UK Investment Trust must be resident in the United Kingdom and derive most of its income from investments, as well as distribute at least 85% of its investment income as dividends (unless prohibited by company law).

The company must not hold more than 15% of its investments in any single company (except another investment trust) and must not be a close company. Investment trusts have the ability to distribute capital profits to shareholders at the trustee’s discretion.

In the United Kingdom, REITs are constituted as investment trusts. They must be UK resident and publicly listed on a stock exchange recognised by the Financial Conduct Authority. They must also distribute at least 90% of their income.

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