Global عربي
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Global عربي
As we noted in a previous guide, investment trusts are a publicly-listed, close-ended (it cannot issue new shares) investment fund, whose structure, features, and governance allows it to make long-term investments that can punch above its weight through strategies such as gearing (leveraging), income smoothing, and diversification.
Investment trusts can invest in a number of diverse assets ranging from stocks and bonds to real estate, as well as niche areas that investors may otherwise not be able to access – such as private equity.
These trusts come in many types and forms, usually determined by the type of asset they invest in and their structure.
Read more about: Investment Trusts vs Other Funds: What Makes Them Different?
These are the most common type of investment trust, issuing a single class of ordinary shares, giving each shareholder the same rights and privileges. Their main aim is capital growth, income, or a combination of both.
These trusts issue different classes of shares, giving each class differing rights and privileges when it comes to income and capital.
These are typically divided into a common stock class and a preferred stock class, the latter of which is pricier for the investor but come with greater advantages.
Some split capital investment trusts offer packaged units, which combine different share classes into a single investment, mirroring the risk/reward profile in a conventional trust. They typically run for a fixed period of time (usually between 5 and 10 years) after which the assets are distributed by share class priority.
Equity investment trusts are those that specialize in investment in publicly-listed stocks in a country, index, region or globally. These are among the most common types of investment trusts.
These are ideal for those with a medium to high risk tolerance and a longer-term horizon.
These are investment trusts that invest in income-generating assets – such as stocks that pay out high dividend income and sometimes bonds and other yield-bearing assets, as well as investing with the goal of capital appreciation.
Some of these trusts tend to retain dividend income in good years in order to continue paying out dividend during market downturns, allowing them to payout sustained long-term dividends.
These trusts are ideal for those looking to make income, such as retirees. They come with a relatively low risk profile and short-term time horizon.
These are trusts that prioritize investing in assets whose value appreciates over time rather than those that generate income through dividends and yields.
They typically invest in companies with high growth potential and may reinvest profits rather than payout dividends.
They have a tendency to invest in emerging market assets, technology stocks, and startups. Consequently, these trusts are overexposed to market volatility due to the risk profile of its assets.
These trusts are ideal for investors with longer time horizons and a high-risk tolerance.
These are trusts that specialize in a particular industry, sector, niche or market that may not be as easily accessible to investors or other investment trusts. Examples include technology trusts, biomedical trusts, infrastructure trusts and others.
These trusts offer specialized knowledge and access to potentially high-growth, high-potential sectors. The downside is that by being so focused these trusts are potentially high in concentration risk and may also suffer from market volatility.
These are ideal for investors who are interested in or are specialized in specific industries.
These are trusts that specialize in startups, companies and businesses that have not listed in public markets, and are primarily private equity or venture capital plays.
They typically buy into early-stage, high-growth, or turnaround businesses. These are highly illiquid, long-term investments with potential for high returns but are also very risky.
These are ideal for sophisticated investors with long-term horizons and a very high-risk tolerance.
Read more about: Private Equity & Venture Capital as Asset Class
These trusts invest in income-producing residential, commercial, or industrial properties. REITs must payout dividends of around 90% of the real estate portfolio’s taxable profits annually to investors.
An investor receives an annual return based on their level of ownership in the REIT.
These are ideal for investors looking to diversify away from financial assets and into real estate.
Read more about: Conventional REITs vs. Islamic REITs, and the case for investing in them
These are trusts that invest in a variety of asset classes, including equities, bonds, currencies, commodities, derivatives and real estate.
It has the advantage of being among the most diversified of the asset-based investment trusts, spreading risk.
It is often used for wealth preservation in a cautious investor looking for a well-balanced portfolio.
These are trusts that invest exclusively in other investment funds or trusts, as opposed to investing in a particular asset class or a range of asset classes.
Investors in these gain access to the professional insights of other investment and asset managers and access to their strategies.
It provides an easier, hands-off option to investors. It does, however, come with added layer of fees.
Disclamer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
