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Investors need to carefully re-evaluate a trust ’ s position in their portfolio if it takes a new direction , writes Emily Perryman
W HEN AN
INVESTMENT TRUST MAKES MAJOR POLICY or manager changes , it can be an unsettling time for investors . It is difficult to know whether the alteration is a sign of rockier times to come or a cause for hope that poor performance will soon be a thing of the past .
The last two months of 2016 saw a flurry of changes at some well-known investment trusts . BlackRock Income Strategies announced a merger and change of manager ; Witan Investment Trust tweaked its benchmark ; and Standard Life European Private Equity altered its policy and charging structure .
Jason Hollands , managing director at Tilney Bestinvest , says modifications should always prompt investors to review the case for continuing to hold the trust .
“ It is important to make sure that the revised strategy will suit your own investment objectives , particularly alongside the rest of your portfolio ( you may already own something similar to the new approach ), and that you are satisfied the underlying manager has the competence to run such a strategy ,” he explains .
INVESTOR CHECKLIST There are specific factors to think about depending on what kind of change has occurred . Adam Carruthers , collectives analyst at Charles Stanley , says that if the trust ’ s policy has been adjusted , investors should think about whether it will lead to better risk-adjusted returns , make the NAV and / or discount more or less volatile , or affect the level of income or ongoing charge .
Last year Standard Life European Private Equity changed its policy to remove size and geographic restrictions on private equity investments . It claimed this would enhance overall exposure to private equity but wouldn ’ t lead to a radical shift in its portfolio .
If the benchmark changes , Carruthers suggests analysing whether the new one is appropriate for the strategy and whether the trust ’ s active share ( the percentage of holdings that differ from the benchmark ) will rise or fall . Witan Investment Trust says its new benchmark offers exposure to a more diverse investment universe :
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