Investment trust 851675 224820830 2008-07-10T15:49:13Z Tomas e 5181812 /* See also */ Investment company {{Citations missing|date=November 2007}} <br /> '''Investment trusts''' are companies that invest in the [[share (finance)|shares]] of other companies for the purpose of acting as a [[collective investment]].<ref name=TMF060313> {{cite web | title = Investment Trusts | work = Your Money | publisher = [[The Motley Fool]] | date= 13 March 2006 | url = http://www.fool.co.uk/Your-Money/guides/Investment-Trusts.aspx }} </ref> Investors' money is pooled together from the sale of a fixed number of shares a trust issues when it launches. The board will typically delegate responsibility to a professional [[fund manager]] to invest in the stocks and shares of a wide range of companies (more than most people could practically invest in themselves). The investment trust often has no employees, only a [[board of directors]] comprising only [[non-executive director]]s. However in recent years this has started to change, especially with the emergence of both private equity groups and commercial property trusts both of which sometimes use investment trusts as a holding vehicle.<ref name=TMF060313 /> Investment trust shares are traded on stock exchanges, like those of other public companies. The [[share price]] does not always reflect the underlying value of the share portfolio held by the investment trust. In such cases, the investment trust is referred to as trading at a discount (or premium) to NAV ([[net asset value]]).<ref name=TMF060313 /> The investment trust sector, in particular split capital investment trusts, suffered somewhat from around 2000 to 2003 after which creation of a compensation scheme resolved some problems.<ref name=AdamsAA>{{cite book | last = Adams | first = Andrew A | title = The Split Capital Investment Trust Crisis | publisher = [[John Wiley & Sons]] | date= October 2004 | isbn = 978-0-470-86858-4 }} </ref><ref name=TMF021030> {{cite web | last = Carlisle | first = James | title = The Lesson From The Split Capital Debacle | work = Market Comment | publisher = [[The Motley Fool]] | date= 30 October 2002 | url = http://www.fool.co.uk/news/Comment/2002/c021030a.htm }} </ref><ref name=Gov030205> {{cite web | title = Split Capital Investment trusts | work = Treasury Select Committee | publisher = [[British House of Commons|House of Commons]] | date= 5 February 2003 | url = http://www.publications.parliament.uk/pa/cm200203/cmselect/cmtreasy/418/41802.htm }} </ref> One of the key differences between an investment trust and a [[unit trust]], is that an investment trust manager is legally allowed to borrow capital to purchase shares. This [[leverage (finance)|leverage]] may increase investment gains but also increases investor risk.<ref name=TMF060313 /> ==History== The first investment trust was started in 1868 by [http://www.fandc.com F&C]. The objective of the [[Foreign & Colonial Investment Trust]] was: 'to give the investor of moderate means the same advantages as the large capitalists in diminishing the risk of spreading the investment over a number of stocks'. As well as being the oldest investment trust, it is now also the largest global growth investment trust in the world and still open to investment.<ref>{{cite web | url = http://www.foreignandcolonial.com/aboutus.asp?pageid=1.1 | title = History | publisher = Foreign & Colonial Investment Trust }} </ref> ==Geographic distribution== Investment trusts are common in the [[UK]] and well established within legal and regulatory frameworks. In other jurisdictions similar types of [[Closed-end fund|closed-end]] investment vehicle exist but may be known by different names. See [[collective investment scheme]]s for more information. == Split Capital Investment Trusts == 'Traditional' investment trusts normally issue only one type of share (ordinary shares) and have a limited life. '''Split Capital Investment Trusts''' (Splits) have a more complicated structure. '''Splits''' issue different classes of share to give the investor a choice of shares to match their needs. Most Splits have a limited life determined at launch known as the wind-up date. Typically the life of a Split Capital Trust is five to ten years. Every Split Capital Trust will have at least two classes of share: In order of (typical) priority and increasing risk *''Zero Dividend Preference shares'' - no dividends, only capital growth at a pre-established redemption price (assuming sufficient assets) *''Income shares'' - entitled to most (or all) of the income generated from the assets of a trust until the wind-up date, with some capital protection *''Annuity Income shares'' - very high and rising yield, but virtually no capital protection *''Ordinary Income shares'' (aka Income & Residual Capital shares) - a high income and a share of the remaining assets of the trust after prior ranking shares *''Capital shares'' - entitled most (or all) of the remaining assets after prior ranking share classes have been paid; very high risk The type of share invested in is ranked in a predetermined order of priority, which becomes important when the trust reaches its wind-up date. If the Split has acquired any debt, debentures or loan stock, then this is paid out first, before any shareholders. Next in line to be repaid are Zero Dividend Preference shares, followed by any Income shares and then Capital. Although this order of priority is the most common way shares are paid out at the wind-up date, it may alter slightly from trust to trust. Splits may also issue ''Packaged Units'' combining certain classes of share, usually reflecting the share classes in the trust usually in the same ratio. This makes them essentially the same investment as an ordinary share in a conventional Investment Trust.<ref name=TMF010606> {{cite web | last = Davies | first = Rob | title = Explained: Zero Dividend Preference Shares | work = Specials | publisher = [[The Motley Fool]] | date= 6 June 2001 | url = http://www.fool.co.uk/specials/2001/specials010606.htm }} </ref><ref name=TMF050901> {{cite web | last = Carlisle | first = James | title = Understanding ZDPs | work = Fool's Eye View | publisher = [[The Motley Fool]] | date= 1 September 2005 | url = http://www.fool.co.uk/news/foolseyeview/2001/fev010905c.htm }} </ref> ==See also== *[[Closed end fund]] *[[Income trust]] *[[Real estate investment trust]] *[[Venture Capital Trust]] *[[Investment company]] == References == {{reflist}} ==External links== *{{cite web | title = Association of Investment Companies | url = http://www.theaic.co.uk/ }} *{{cite web | title = Trustnet | url = http://www.trustnet.com/it/ }} *{{cite web | title = Splitsonline | url = http://www.splitsonline.co.uk/ }} <!--Navigation boxes--><br /> {{Investment-management}} [[Category:Financial services]] [[Category:Investment]] [[Category:Funds]] [[de:Investmentgesellschaft]] [[ru:Доверительное управление]]