Do you have enough investment trusts in your diversified portfolio?
Two recently published studies have shown the outperformance of investment trusts over both their open-ended equivalents and their ETF rivals (where available) over the last ten years.
The first study (source Winterflood Securities,Morningstar,FTSE,Bloomberg-data to 28
th February 2017),shows that in approximately three quarters of the sub-sectors, the price performance of
closed end funds significantly bettered that of the IA category unit trusts over the ten year period, as
shown below. This performance advantage should be viewed in combination with the other
advantages of owning investment trusts I have covered in a previous article (progressive dividend
polices, corporate actions, live pricing etc). Over the shorter five-year period, investment trusts
equalled or outperformed in 13 out of the 16 categories, the exceptions being Global Equity Income,
North America and Global Emerging Markets.
In a future publication, I will look at investment trusts versus their ETF equivalents over the ten-year
Over the long term, it has been proved that asset allocation accounts for the bulk of the
performance attribution. The message from this current analysis is make sure you are in the right
vehicle within your asset allocation buckets!
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