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Understanding Investment Trusts

Anyone coming to Investment Trusts for the first time can find some of the terminology and the vagaries of their structure difficult to understand. Put simply investment trusts are set up as listed companies issuing shares that can be traded on the London Stock Exchange, like any company, they issue a fixed number of shares, hence the term ‘closed-ended’ – to raise capital, which the fund manager then allocates to investments. Trusts’ closed-ended structure means investors need to bear in mind two prices: the share price, which goes up and down, according to investor demand and supply; and the value of the underlying assets, known as the Net Asset Value (NAV).


Investment trusts offer a greater degree of flexibility, and make it easier for investors to hold the fund manager to account. This flexibility comes because Investment Trusts manage a fixed pool of capital, obtained both at the onset of the IPO, and ongoing through the life of the trust. The fund manager sets out to make that pool of capital grow in value, and in contrast to ‘normal’ funds, the assets of an Investment Trust are not added to, or subtracted from, every time an individual investor buys or sells. This makes Investment Trusts much long term in nature; they do not have to sell the underlying investments to meet the demands of any withdrawals. If shareholder’s wish to exit, they simply have to sell their shares in the trust, with no impact on the underlying portfolio, which means the Trust has just as much capital as it did previously. This gives the Investment Trust manager freedom to take a longer-view, as there are fewer fears of being forced to sell assets during market sell-offs, simply to meet a flood of redemptions.


Bellevue Healthcare Trust has an annual redemption option. This allows investors to exit their investment at or close to the net asset value of their shares once a year. Shareholders may request the redemption of all or any of their shares. The right of shareholders to request the redemption of all or any of their shares shall be exercised by the shareholder delivering to the receiving agent (or to such other person as the Directors may designate for this purpose) a duly completed redemption request.


  • Your money and hence investment decisions are always entrusted to a very experienced professional manager.
  • Buying at a premium or a discount, as an investment trust’s share price will rise and fall in respond to investor demand. If a trust is popular and investors are piling in, its shares can move up to trade at a premium, meaning they can exchange hands for a greater cost than their actual worth or net asset value (NAV). Likewise, if a trust falls out of favour and investors sell their shares, the price of the shares can fall to a discount to the NAV. Investors can get a bargain by snapping up investment trust shares when they are trading at a discount. If a trust is trading at a 10% discount, you can buy £100 worth of asset for £90.
  • Investment Trusts can borrow, which adds a layer of risk, but it also gives fund managers the chance to magnify returns. This mechanism is referred to as gearing, for example if a trust borrows the equivalent of 8% of its assets then it will be 8% geared. The average gearing level for all investment companies is relatively modest, around 7%.
  • If you’re a more ‘adventurous’ or indeed specific investor looking for a route into focused industry sectors such as biotechnology or single countries, then you can find a trust to meet your requirements. 
  • Income seekers who want the reassurance of a steady and reliable dividend pay-out are well catered for with Bellevue Healthcare Trust, as we offer a guaranteed 3.5% annual dividend payment.
  • As with all listed companies, an independent board whose role is to ensure shareholder interests are being met, and closely monitors the funds’ performance oversees Investment Trusts, they also have the ability to replace the fund manager should performance issues arise.
  • Unlike open-ended funds, they are able to retain up to 15% of the dividend income received from underlying holdings each year, and use it to supplement or ‘smooth’ payouts in any leaner years.
  • It is simple to keep track of how your investments are performing, your fund manager will provide a regular monthly update through fact sheets, this will provide quick summaries of how your investment is doing, and what your money has been used to buy.