Investment Trusts powerful differentiator


Over the years I have frequently discussed the advantages investors enjoy when owning investment trusts. Recently, I have been reminded of these again
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I don’t understand why he can’t own these two companies in a unit trust. Most investors buy them over investment trusts and the managers there don’t seem to have difficulty buying company shares so why doe John Bennett?

I don’t get his point.


It’s not that he can’t own them in a unit trust @eurofile the point he’s making is that in a unit trust the manager has to be mindful of how easy it is to exit a holding because when investors sell their unit trust holdings the manager has to sell shares in the market to pay the unit holder. If he has too many illiquid stocks he might be forced to sell his more liquid holdings even though they might be the best performers. With investment trusts the manager doesn’t have to worry about that because when shareholders want to sell they sell to other investors not back to the manager.

Does that make sense?


One of the disadvantages of open ended funds like unit trusts @eurofile is because investors tend to sell when market have already fallen and buy after the recovery has happened, open ended fund manager often find themselves selling and buying at the wrong time in the cycle. So instead of buying stocks when they’re cheap they’re having to sell them, and often sell their most liquid holdings, so they can pay unit holders who want out of the fund. This doesn’t happen with an investment trust and that’s what John Bennett is getting at.

He is actually a bloody good fund manager bye th way, I highly recommend his trust.


It’s encouraging to see a fund manager being honest about his outlook when it’s not particularly bullish and I tend to agree with him that investing in “special situations” awaiting a catalyst but who are already cheap can be a good strategy.

The Henderson European offering through both all three of their investment trusts and unit trusts is strong. It’s probably the strongest part of their business and Bennett one of their most capable managers in my view.