2nd November 2020
In this piece we tell you what is worth knowing about investing in Investment Trusts in Ireland. We also share some performance data and results of the most popular Investment Trusts in Ireland.
Investment Trusts have been in vogue for a little while – in no small small part due to the tax treatment of any realised gains. Many investors are hell-bent on finding an option that might allow them to invest in a diversified and low-cost way, and try to invest via Capital Gains Tax regime as opposed to Exit Tax regime. Some believe Investment Trusts in Ireland allow you to do that, but like many things it’s not as straight-forward as that!
We discussed the main types of investments and their tax treatment in Blog 157, which might worth checking-out before you read on.
Ultimately, one shouldn’t let the ‘tax tail’ wag the ‘investment dog’, so before jumping into Investment Trusts in Ireland let’s check if they may or may not be a useful route to take for you.
Pros of Investment Trusts in Ireland:
Cons of Investment Trusts in Ireland:
It will depend on your view-point, but the final point could be viewed as either a Pro or a Con! I have mentioned MIFID 2 before, and how it was introduced to ensure financial service companies ensured improved protections to investors, in terms of information, capital protection and safety. In 2016 the UK regulator, under some persuasion it seems, ruled that Investment Trusts could avoid having to automatically act in line with the rigors of MIFID 2.
I’m aware that most investors focus on is the performance, however the above Pros and Cons cannot be ignored with Investment Trusts in Ireland. A tax, fee or logistical issue from the above Pros and Cons can make any potential performance advantage totally irrelevant – they are that significant. So with that caveat out of the way, on to the main event!
Below is a snap-shot of some research we did recently – looking at 7 of the most popular Investment Trusts today. For comparison I have also included a simple yet effective Global Equity portfolio of passive index funds.
We included a significant variation of Investment Trust companies in the mix here; Property, Environmental, Wind Energy, Infrastructure and Multi-asset. All domiciled in the UK. Importantly, these are not endorsements or recommendations of any sort – they are purely the main ones that appear to be getting attention in recent times, mentioned on line and spoken about by advisors.
While performance has been strong for some and awful from others – it shows again that when it comes to active management, there is no knowing who will continue to beat the market and who won’t! Read our recent Blog 153 where we shared the fact that the majority of active funds do not beat the market over any consistent period of time!
No surprises that the top performing company here was the one with a heavy tilt to US Tech companies.
What was a little more surprising is that the one fund here that aims to track Global Equity (MSCI) would be expected to deliver broadly similar returns as the blended passive portfolio I have included in the comparison, actually under-performed that passive portfolio by over 40% over the 7 years! Madness.
There are two really clear conclusions to take from this, in my view at least:
That is all!
Hope you found it useful.
Paddy Delaney QFA RPA APA
Please read Disclaimer on all of this. This is not advice nor recommendation – don’t be silly with your hard-earned!
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