What is an Investment Trust?

An investment trust is a public limited company, traded on the London Stock Exchange

It invests in the shares of other public limited companies with the aim of generating a profit for its shareholders. A trust allows an individual to invest in a range of companies, as well as bonds, property or other assets, through a single investment trust.

As it is a public limited company, an investment trust is owned by its shareholders – its investors – who elect an independent Board of Directors who in turn look after its shareholders’ interests. The Board chooses a professional fund manager – Polar Capital is the manager of PCT – to run the investment trust day-to-day, decide where to invest the money held by the Trust and when to sell its holdings.

Why Invest in an Investment Trust?

Polar Capital Technology Trust plc is a closed-ended investment trust. As with similar investment trusts, there are a number of key investor benefits:

  • Economies of scale: Investors in an investment trust pool their money, split any dealing costs and administration fees which can mean overheads are significantly lower.
  • Spread risk: Investing in one investment trust provides access to a diversified portfolio as each trust is an individual company that owns a range of shares.
  • Investment expertise: Investment trusts use professional management expertise. Polar Capital Technology Trust plc’s team comprises a group of specialist technology fund managers and investment professionals.
  • Small, flexible investments: You can invest small lump sums, or monthly payments from as little as the cost of a mobile phone contract.
  • Simplicity: In a single investment trust, investors have access to a wide range of investments, some of which may not be held directly in a portfolio as they may be deemed too expensive or complicated.
  • Income: Investment trusts are entitled to keep up to 15% of their income to support dividend payments during years when yield is not so readily available.
  • Accountability: Investors in an investment trust are also its shareholders and therefore able to hold the company and its Board of Directors to account, as with any public listed company, and vote at its AGMs.

Statements/Opinions/Views: All opinions and estimates constitute the best judgment of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily represent the views of Polar Capital. This material does not constitute legal or accounting advice; readers should contact their legal and accounting professionals for such information. All sources are Polar Capital unless otherwise stated.

How do Investment Trusts compare with Unit Trusts?

The key difference between investment trusts and unit trusts is their structure.

For a unit trust, a fund manager buys shares in companies listed on the stock market on behalf of a fund. This fund is divided into individual units which are then bought and sold by investors. In principle, there is no limit to the number of units that can be created in this way, hence they are described as ‘open-ended’.

Investment trusts issue a fixed number of shares when they are launched and are therefore described as ‘closed-ended’.