Investment Trust Benefits

Investment Trusts and Closed-end Companies:

1. Have a Board. The Fund Manager has to report to the Board and take his remit from them. Thus the corporate governance around these trusts is more robust than with an Open-ended Trust where the Fund Manager reports to Trustees.

2. Can borrow money which is referred to as have gearing. This, if used correctly can be a major enhancer to performance and/or income generation. It can, of course, produce the opposite if not controlled correctly.

3. Do not always cost what they are worth. Value can be had in purchasing a trust at a discount. This will enhance your income as well as capital return as you can purchase more shares for the same amount of money. With Unit Trusts you pay the price they are worth. Discounts can widen and therefore have a negative impact on the growth performance however over the medium to long term this should not be noticeable.

4. Have the ability to retain 15% of the income received to add to an income reserve that, in times of need, can be dipped into to maintain the dividend paid, or even increase it. When BP cut the dividend it did not affect any dividend payments from Investment Trusts as they could dip into the reserve. Indeed many still managed to increase their dividend and some have done this for more than 40 years. On the other hand Unit Trusts and their like had to reduce their dividend.

5. Will not suffer as much if there is a run on the book. If large numbers of holders of a Unit Trust want out the Fund Manager may be forced to sell some of his underlying holdings to bail them out. With Investment Trusts et al there is no need to sell any holdings and the portfolio remains as planned. Equally the Manager will not be forced to buy in at the top price. Again, proven very useful in the latest market crisis.

6. Have never paid commission to advisers thus utilising their assets purely for investing. RDR has tried to stop most commission being paid from open-ended trusts to advisers and this may narrow the gap between the two types of funds but that remains to be seen, since Investment Trusts have responded by reducing their fees further.

7.Dealing is T+1, meaning that if selling your holdings you will have the cash in your account the following day. Unit Trusts can take days.

8. Where the underlying investments are Property shares, the shareholder is never in a position where the Manager can place a moratorium on the sale of his shares for any fixed period. Compare that with holders of Unit Trusts where this can and does happen to the detriment of the investor when special circumstances arise.

These attributes have been overlooked by investors since it is believed that they are not really that relevant or important, or maybe happen rarely. Over the last decade the open-ended investment world has been hit twice with property funds temporarily closing the door, Neil Woodford’s issue with too many illiquid assets forced a closing of the open-ended fund for months, and BP cutting its entire dividend resulting in less dividend being paid to investors. The investment trusts continued unabated.

Our Investment Offering

At Pigotts we offer a choice of three styles of model portfolios, or templates. If it suits your risk profile it is possible to mix the growth and defensive portfolios to produce a very diversified blend. Please click on the tabs for following information about these accounts:

The Growth Portfolio (G3)

This portfolio is for those requiring capital growth and who accept an increased exposure to risk in exchange for a higher return over the medium to long term. Some dividends will be received mainly to satisfy management charges and any excess will be reinvested for growth.

There is an ISA facility and I will use any ISA allowance you have each year to transfer stock and / or cash to it from your General Investment Account (GIA) so as to reduce or avoid you paying CGT as far as possible. If you wish to find out more, please contact us.

The Extra Income Portfolios (SEI 10 and 20)

If your need is for higher income then the SEI portfolios could be for you.

These portfolios provide extra income that is paid in regular fixed amounts to your bank. It should pay out far more than any Building Society, as it consists of up to 20 trusts (or 10 if you want more income and for a higher risk) chosen from a diverse field of global equities, bonds, debt and property. Most of the funds have consistently grown their dividends year on year. This is crucial if you are to avoid inflation eating into your income. Investment Trusts and other closed-ended companies are particularly good in providing a growing income over a long period. Find out why.

The fixed amount of income is paid monthly, or quarterly, to your bank account.

If there is an excess of income this will be used to purchase more investments that will in turn provide more income, or increase the fixed amount received. As you would expect, capital growth will be limited. The intention is to grow the income but this is not guaranteed and, in the worst market conditions, income may even reduce. If this happens we will do our best to maintain payment of the fixed amounts of income but that cannot be guaranteed.

Owing to the relatively simple nature of this account the charges are much reduced to reflect this. If you wish to find out more, please contact us.

The Defensive Portfolio (D7)

This portfolio is not an absolute return fund, but the holdings have been specifically chosen to be as uncorrelated as possible, diversified as possible with the result that the portfolio falls less than the market in bad times while growing with the market in good times. Past performance is however no guide to future returns, but if the trend continues the portfolio will outperform the All-Share index over time, simply by putting down the anchors when times are hard.

The portfolio does include equities, bonds, alternatives, and debt trusts. If you wish to find out more, please contact us.

Initial Free Consultation

Initial consultation is free with no obligation to proceed. Pigotts won’t charge until a purchase is made in the stock market. For details of both Pigotts’ and Transact’s charges and discounts please click here.

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VAT exempt charges

Although Pigotts is purely fee-based, Transact take the charges as commission automatically from your account, exempt of VAT. For details of both Pigotts’ and Transact’s charges and discounts please click here.

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Discounted Charges

Pigotts’ and Transact’s annual management charges have discount mechanisms. For more information on discounts please click here.

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Nominee Account

The legal ownership of your account belongs to Transact but the beneficial ownership belongs to you. This has been the “smart” way to run clients’ investments for some years. Share Certificates, Dividend cheques and Transfers are obsolete. All your holdings will be registered on CREST through Transact who deal with the day-to-day administration of market trading, the allocation of dividends and processing any corporate actions. This enables, for example, sale proceeds to be credited to your account the next working day after the sale (T+1) and the cash earns interest immediately.

Your Transact Wrap Account

can include the following:

  • General Investment Account
  • ISA Stocks and Shares Facility
  • SIPP/Personal Pension Facility
  • Qualifying Savings Plan
  • Onshore/Offshore Bonds
  • Pooled Deposit Facility

This hassle-free administration means that there is no need to file mounds of paperwork from various providers or managers.

The Pooled Deposit Facility holds reserve cash, ring-fenced against investment and earns a competitive rate of interest. Cash is spread across four banks to make sure each Client is protected up to £340,000, subject to any amounts of cash that may be placed by you outside Transact in any one of the four banks used.

Competitive Rate of Interest

All cash, wherever it is in your account, receives a competitive rate of interest paid monthly, with basic rate of tax deducted by Transact.

Reporting

Transact send you quarterly valuations. Additionally, in May you receive a 12 month Statement and Consolidated Tax Certificate that can be sent to HMRC with your Tax Return. This makes filing your income tax return much simpler.

Pigotts also send you an annual Portfolio Review dated to your last birthday. Quarterly Market Updates are also sent to you outlining current strategies given the market climate. Current valuations and statements, for any period, are available whenever requested, or can be run online using your website account. Before a Purchase within your chosen portfolio is carried out you are sent, via your preferred correspondence route, an Investment Advice Note (IAN) setting out the advice and reasons for action. IAN conditions are set out in the Letter of Engagement. An IAN will also be sent when any trusts need to be switched.

From time to time you will also be sent reports and news items on relevant topics.

Level of Risk

All investments involve a degree of risk to your capital and you are accepting this by deciding to invest, indeed, you should contemplate carefully the appropriate level of risk you are prepared to take. We can help with this at our initial meeting or discussion. The nature of risk can vary and our Information Pack and Risk Questionnaire helps you gain a good insight into this often-misunderstood subject. When choosing your Personal Risk Profile we will assess your personal financial needs and aims together.

Web Access to Transact

In addition to the above reports you can access your account at any time with your secure PIN. You can view the current valuation that uses closing prices from the previous trading day and the Transaction Listing for any period. You can also deposit and withdraw cash direct from your Pooled Deposit Facility, if you have one.

Web Access to the Client Portal

Pigotts also has a Client Portal which will enable you to access all your documentation securely, as well as upload documents for us to review. You will receive an email when a new document has arrived. You will be sent a username and password to gain access.

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