What is an Investment Trust? | Investor Guidance (2024)

FAQs

What is an Investment Trust? | Investor Guidance? ›

Investment trusts are Public Limited Companies (PLCs) that are listed on a stock exchange, so investors buy and sell from the market. They come with their own independent board of directors, and you become a shareholder when you invest in a trust.

An investment trust is a public limited company that aims to make money by investing in other companies. Owning shares in an investment trust is a way of investing in a variety of different companies.

Net Asset Value is the net value of an investment fund's assets less its liabilities, divided by the number of shares outstanding. Funds can be open or closed and the pricing of each share is based on NAV. The price of each fund share is reflected as the NAVPS or per-share value.

Example #1

Suppose one invests $1,000 in XYZ Trust. It pools the money from shareholders and other investments to purchase a diverse range of products, including shares, bonds financial assets. This fund becomes the financial source for the fund manager to buy shares.

A Trust Fund is a legal entity that contains assets or property on behalf of a person or organization. Trust Funds are managed by a Trustee, who is named when the Trust is created. Trust Funds can contain money, bank accounts, property, stocks, businesses, heirlooms, and any other investment types.

Investment trusts are publicly listed companies that invest in other companies' shares on their investors' behalf. They can invest in a range of different asset classes, such as: Equities/shares (e.g. utilities and banking)

WHAT IS NAV? NAV stands for Net Asset Value. The performance of a mutual fund scheme is denoted by its NAV per unit. NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on a given date.

NAV full form is Net Asset Value. It is a fundamental metric used to assess the value of a mutual fund. It represents the per-unit value of the fund's assets after deducting any liabilities. Essentially, NAV indicates the price at which investors buy or redeem mutual fund units.

NAV stands for net asset value. In finance, it is used to evaluate the value of a firm or an investment fund by subtracting its liabilities from assets.

Can you invest trust fund money? ›

Unless the trust instrument—the document that governs the behavior of the trust—specifically permits or forbids investing actions, a trust fund's capital can be invested in any asset that would be consistent with fiduciary duties the trustee owes to the beneficiaries of the trust.

Another possible way to get money out of a trust fund is to request a cash withdrawal. This would require putting the request in writing and sending it to the trustee. The trustee might agree. But that individual or entity must also fulfill their fiduciary obligations.

Unlike unit trusts and OEICs, an investment trust is a quoted company and listed on the Stock Exchange. Whether you're buying or selling you can do so by placing a deal once logged into your Smart Investor stocks and shares ISA, self-invested personal pension (SIPP) or general investment account.

The major disadvantages that are associated with trusts are their perceived irrevocability, the loss of control over assets that are put into trust and their costs. In fact trusts can be made revocable, but this generally has negative consequences in respect of tax, estate duty, asset protection and stamp duty.

The ability to 'gear' or borrow money sets investment trusts apart from funds. While open-ended funds are not allowed to borrow money, investment trusts can borrow money to invest alongside the money pooled by investors.

Risks Associated with Investment Trusts

The net asset value of investment trust fluctuates due to the price movements of the investment securities held by the investment trust (assets denominated in foreign currencies are also subject to the exchange rate fluctuations).

Yes. Investment trusts have potentially higher dividend yields, partly because of their ability to use leverage and the income-focused strategies often employed by fund managers. ETFs can pay dividends, too, but their yields derive from their underlying assets.

It is generally better to retitle your investment accounts to your trust during your lifetime rather than rely on a TOD to transfer your accounts at death. That way, if you become incapacitated during your lifetime, your successor trustee can step in and handle your trust accounts.

ETFs are open-ended, meaning that the number of shares available can increase or decrease based on demand. Investment trusts, on the other hand, are closed-ended, meaning that there is a fixed number of shares available. Another key difference between the two is how they are traded.