Wrong investment decisions can lead to debt which can only be overcome with debt settlement. Whether the open-ended funds were for property, particularly for the more direct part of the market, or it was for some of the frontier markets, these funds received significant inflows as they appeared to carry the potential of starting a trend.
Since these were open-ended, most investors assumed that they would be able to withdraw from them with ease. However, a number of specialist funds have been forced in order to stop investors from taking out money after it was seen that it is becoming too difficult to sell the underlying holdings.
When it comes to the expectations of investors, investment trusts can better manage these. Such trusts allow providers to raise a particular amount for a strategy upfront. The close ended structures provided by these investment trusts make it impossible to sell their underlying assets for the investors without a special series of vote.
They are empowered to issue extra share classes such as C shares at subsequent points of time depending upon the development of the market in which they have invested. There is also the option for investors to sell their shares that back the assets of the investment trust rather than forcing a fire sale of the assets themselves.
Hence, providers can therefore grow with the market rather than grow the market itself. When it comes to specialist asset classes and other areas, the financial advisers who are independent would require considering investment companies and also open-ended funds post-RDR.
The communications director at AIC, Annabel Brodie Smith said that even though RDR is a long-term opportunity for the concerned sector, it is quite probable that much of the benefits of the closed-ended structure such as better long-term performance, income records that are commendable and the sustainability required for investing in specialist asset classes are like to attract more number of people to the sector.
It is also easier to buy investment companies as some major platforms such as FundsNetwork of Fidelity have already started outlining plans according to which they can add these to their offering. It is already feasible to buy them with the help of smaller platforms such as Transact and Alliance Trust Savings.
However, it is to be kept in mind that increased access and choice for advisers can only improve the prospects for the sector.
