Law Debenture is making the case for investment trusts to a younger audience as the sector looks to attract a new generation of shareholders.
The company used its fourth WIN financial education event to focus on why younger people remain underrepresented among investment trust holders and how the structure can support long-term investment goals.
The average investment trust holder is between 60 and 65 years old. Law Debenture sees greater education as one way to improve awareness among younger people who may be familiar with shares, funds and online investment platforms but know less about investment trusts.
Investment trusts are listed companies that hold portfolios of investments. Their shares can be bought and sold on the stock market, while professional fund managers decide how the underlying portfolio is invested. One of their main structural features is a fixed pool of capital. Unlike open-ended funds, investment trusts do not normally need to sell portfolio holdings when shareholders decide to sell their shares. This can give managers more freedom to maintain long-term positions rather than responding to short-term withdrawals.
That structure can be particularly relevant when investing in assets that may take longer to buy or sell. Investment trusts can provide exposure to areas including private companies, infrastructure, commercial property, emerging markets and smaller businesses. These assets can broaden a portfolio, although they can also carry higher risks and may not suit shorter investment timeframes.
Investment trusts can also borrow money to invest, a practice known as gearing. Gearing can increase gains when markets rise, but it can also increase losses when investments fall. The level of borrowing used by a trust is therefore an important consideration when assessing its risk profile.
Income is another feature of the structure. Investment trusts can retain up to 15% of the income they receive each year and hold it in reserve. Those reserves can later be used to support dividend payments during weaker periods.
Law Debenture also stresses the importance of matching investments to the length of time before the money is needed. A longer investment horizon can allow more time to recover from market falls and may make higher-risk assets more practical. Money needed in the short term requires a different approach because there may not be enough time for investments to recover from a downturn.
Law Debenture Corporation plc (LON:LWDB) provides a wider range of services including corporate and pension trusts, process agent services, treasury management, corporate services including for special purpose vehicles, structured finance administration and whistleblowing services.
