Closed-end funds or investment trusts may have fared better than their open-ended alternatives following Brexit, research suggests.
Following the result of the referendum, many fund houses bore the brunt of Brexit, with share prices of UK managers such as Schroders and Henderson being hit particularly hard.
The commercial property sector was also impacted badly with a host of asset managers suspending their open-ended property funds as they assessed the impact of the vote on the value of the underlying assets.
According to consultancy firm Cerulli Associates, this episode reignited the debate about the merits of closed vs open-ended funds.
“Fans of the UK’s long-standing investment trust industry will say that it is not just in the property sector that closed-end vehicles come into their own. Private equity is another obvious example,” said Barbara Wall, Europe managing director at Cerulli.
As investment trusts often trade at a discount, this can worry investors, especially at times of market turbulence. However, Cerulli notes that the trust can buy back shares, an option which may serve to reassure investors.
Finally, as seen with Alliance Trust, another advantage investment trusts have is that they can replace management if things aren’t going to plan.
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