AIC director general: ‘Logical’ to put trusts into open-ended sectors

Ian Sayers, director general of the AIC, has suggested trusts be integrated into the Investment Management Associates’ (IMA) open-ended investment company sectors.

Sayers said closed-ended vehicles and OEICs with comparable asset allocations should be placed in the same sectors to level the playing field in a post-RDR environment.

He added investors and IFAs should pick their investments based on a portfolio’s asset allocation, instead of overlooking investment trusts because of their more complex nature.

“One of the key things RDR is attempting to do is to get advisers moving away from looking at the product and instead look at what the particular portfolio is investing in, whether it be closed or open-ended,” said Sayers.

“A way of ensuring this happens would be to put investment trust and OEICs with similar mandates in the same sector.

“I think it would be logical to put the closed-ended Global Growth sector in with the IMA Global sector, as in both sectors the managers invest in like-for-like assets.”
However, Sayers said there are practical barriers to overcome in order to make this change.

A number of sectors would be difficult to compare, such as private equity, he said. 
“There are a number of closed-ended sectors which cannot be compared with open-ended. Private equity would not be able to fit into any of the IMA sectors and, similarly, none of the investment trust sectors could slot into the managed funds.

“So there are a lot of practical issues and it would not be straightforward but I believe it would be fairer for investors to put similar funds in the same sector so investors can judge whether a portfolio’s philosophy and asset allocation is right for them.” 

Last month the government announced plans to revise the rules governing investment trusts, allowing managers greater flexibility.

The revisions of the rules, which have been unchanged since 1965, are set to be implemented in the finance bill this autumn.

When the new rules are implemented, managers will be able to invest 20% in a single holding, having previously been constrained to 15%, and will also have greater flexibility to use derivatives.