Alternative Assets Drive Growth of Investment Trusts
The UK investment fund industry’s assets topped Â£ 200 billion for the first time, fueled by growth in alternative investment funds.
Data from the Association of Investment Companies (AIC) released today (August 12) showed UK listed investment firms now have assets of Â£ 209 billion, doubling over the past few years. six years since 2013.
Much of this increase is due to the rapid growth of alternative investment funds, in areas such as student property, medical centers and aircraft leasing.
The sector’s assets have more than doubled from Â£ 34.7 billion to Â£ 80.3 billion in six years.
Peter Elston, chief investment officer at Seneca and investor in alternative trusts, said there were two reasons for the growth.
âThe first is that low bond yields mean that many of these trusts act as bond agents, with the income being used by investors to replace income they can no longer earn from bonds.
âThe second reason is that many of these areas, such as aircraft leasing, were areas where banks provided financing, and individual investors could not access them. But since the financial crisis, banks have moved away from these sectors and investment trusts have replaced them.
Ian Sayers, Managing Director of AIC, said: âAs investment firms are the natural home of illiquid assets, it is no surprise that a significant portion of this growth has occurred in alternative industries, which are often invested in more difficult-to-sell assets such as property and infrastructure.
David Scott, advisor at Andrews Gwynne in Leeds, said the impact of the Retail Distribution Review, which prohibited advisers from receiving a trailing commission, had boosted demand for advisers for investment trusts.
This is because investment trust providers have never been able to pay a trailing commission and were therefore less popular with advisors before.
Mr Scott added: âComing from a stock market background, I have always used trusts, right now I use them a lot for alternative assets because they are not listed, and therefore the investment trust structure. is ideal for holding these assets. ”