Revealed: The investment trusts set to benefit from RDR

Numis Securities predicts established equity income investment trusts will be the main beneficiaries of RDR when it is implemented next January.

The broker does not expect the benefits of RDR to be spread evenly across the closed-ended sector, but said larger trusts will be at an advantage. Charles Cade, an analyst at the group, said income trusts with proven track records will be used more by IFAs and intermediaries once trail commission is abolished.

However, he warned there will not be a level playing field between OEICs and investment trusts until platforms offer closed-ended vehicles. 

“The likes of Neil Woodford’s Edinburgh investment trust, Murray International, City of London, and Temple Bar, which have strong long-term performance, and can exploit the sector’s ability to smooth dividends over the cycle, will benefit most from RDR,” said Cade.

“We believe the key impact of RDR would come from trusts’ inclusion on fund supermarkets and wrap platforms that are widely used by IFAs and the retail market in general.

“Currently the four largest fund supermarkets do not include investment trusts and until they do, the playing field remains slanted against investment companies.”
Cade added other areas of the closed-ended space he thinks will thrive post-RDR include specialist mandates and trusts with a risk averse investment philosophy.

“Portfolios with lower risk profiles will also gain traction, for instance, Sebastian Lyon’s Personal Assets, and RIT Capital,” said Cade.

“Specialist mandates will also be more popular due to the demand from multi-managers seeking exposure to asset classes that are not readily available through open-ended funds or ETFs, for instance, infrastructure focused trusts.”