By their nature, investment trusts are designed for long-term investing. This is a message that has been reinforced in the findings of recent research from the Association of Investment Companies (AIC).
The AIC has found that 50 investment trusts would have made investors ISA millionaires if they had invested their full ISA allowance in them each year between 1999 and 2024. To read more about the research and its full methodology, please click here.
Among the trusts managed by Janus Henderson Investors, three were named as part of the list. Per the research, from an initial investment of £326,560 invested over the period:
- The European Smaller Companies Trust (formerly TR European Growth) would have left investors with £1,295,133.
- Henderson European Trust (formerly Henderson European Focus Trust) would have left investors with £1,146,372.
- Bankers Investment Trust, which invests in global stocks, would have left investors with £1,103,182.
Investment trusts have several features that aid long-term investing. Most notably, a permanent capital structure means that investment trusts are never forced sellers of the underlying assets they invest in, regardless of market turmoil or investment fads. This is particularly beneficial when investing in something with less liquidity, like smaller companies.
They are also able to use facilities like gearing – borrowing money – to enhance returns when borrowing is cheap and they see opportunity in the market (although it must be stressed that gearing can also exacerbate losses).
To find out more about our range of trusts, please click here.
Find out more about the AIC’s ISA millionaires here.
Gearing
Gearing is a measure of a company’s debt relative to its equity, showing how far its operations are funded by lenders versus shareholders. Investment trusts: The effect of borrowing money for investment purposes (financial gearing). The amount a company can “gear” is the amount it can borrow in order to invest.
Liquidity/Liquid assets
Liquidity is a measure of how easily an asset can be bought or sold in the market. Assets that can be easily traded in the market in high volumes (without causing a major price move) are referred to as ‘liquid’.