An Investment Company, also commonly referred to as an investment trust, is a closed ended pooled fund. Investment Companies can invest in all asset classes and across geographies. They are one of the oldest investment vehicles in the UK and remain popular today. Like all listed companies, an Investment Company has a board of directors that are responsible for the fund and more critically to ensure decisions are made in the best interest of the shareholders.
At IPO an Investment Company issues a fixed number of shares after which no new money flows in or out the fund. Unlike open ended vehicles, investors buy and sell shares in the Company, which come with the ability to exercise voting rights. These shares are accessible directly on the stock exchange, via a platform or through a broker. The value of the assets held by an investment company is the Net Asset Value. Because a fixed number of shares are issued the value is subject to the supply and demand principal, commonly referred to as a discount or premium.
The closed-end structure means the trading activity of these shares has no impact on the underlying portfolio holdings enabling the investment manager to take a long-term view and invest in less liquid asset classes.
Investment Companies can borrow money to make additional investments, this is called ‘Gearing’. The principal behind gearing is the Investment Company uses the additional funds to invest for greater profit that the cost of borrowing and therefore magnifying the performance. An additional feature, unique to Investment Companies is the flexibility in the distribution of income. Investment Companies can retain up to 15% of their income to distribute in leaner years
An Investment Company, also commonly referred to as an investment trust, is a closed ended pooled fund. Investment Companies can invest in all asset classes and across geographies. They are one of the oldest investment vehicles in the UK and remain popular today. Like all listed companies, an Investment Company has a board of directors that are responsible for the fund and more critically to ensure decisions are made in the best interest of the shareholders.
At IPO an Investment Company issues a fixed number of shares after which no new money flows in or out the fund. Unlike open ended vehicles, investors buy and sell shares in the Company, which come with the ability to exercise voting rights. These shares are accessible directly on the stock exchange, via a platform or through a broker. The value of the assets held by an investment company is the Net Asset Value. Because a fixed number of shares are issued the value is subject to the supply and demand principal, commonly referred to as a discount or premium.
The closed-end structure means the trading activity of these shares has no impact on the underlying portfolio holdings enabling the investment manager to take a long-term view and invest in less liquid asset classes.
Investment Companies can borrow money to make additional investments, this is called ‘Gearing’. The principal behind gearing is the Investment Company uses the additional funds to invest for greater profit that the cost of borrowing and therefore magnifying the performance. An additional feature, unique to Investment Companies is the flexibility in the distribution of income. Investment Companies can retain up to 15% of their income to distribute in leaner years