Funds & wrappers
Investment trust
Also called Closed-ended fund
A listed company whose business is holding investments, with a fixed number of shares.
How it works
Because the share count is fixed, the manager never has to sell holdings to meet redemptions. That makes closed-ended structures well suited to illiquid assets such as property or unlisted companies.
Trusts may borrow to invest, which increases returns in both directions, and may hold back income in good years to support dividends in bad ones.
Where it misleads people
Gearing and a discount compound each other. A geared trust at a widening discount falls considerably more than its underlying assets do.
Related terms
- Premium and discountThe gap between a listed fund’s share price and the value of the assets it holds.
- LeverageUsing borrowed money to increase exposure beyond what your own capital would buy.
- Net asset valueThe value of everything a fund owns, minus what it owes, divided by the number of units.
- FundA pooled vehicle where many investors’ money is managed together under one strategy.
More in Funds & wrappers
All 25 Funds & wrappers terms · The full glossary, 433 terms
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