Trustnet Magazine Issue 8 June 2015 | Page 25

SCHRODERS ONE OF THE BIGGEST ATTRACTIONS OF INVESTMENT TRUSTS IS THEIR ABILITY TO CONSISTENTLY INCREASE THEIR DIVIDENDS so if managers think there is value in a particular market, they can borrow money to use for further investments. This can magnify gains in a rising market, but conversely it can amplify losses in a falling one. As a result, the more a trust borrows, the greater the capital risk. WHERE TO INVEST Given the long term nature of saving for children who won’t need the money for 18 years or more, parents who are prepared to accept the associated risks can afford to look to more volatile parts of the market which often offer the highest potential for growth. Broadly speaking, volatility resulting in losses in the short term shouldn’t matter, because time is on your side and you can wait for markets to recover. Asia presents a compelling choice for long-term investors – it is a strong growth area already. According to the World Trade Report 2014, Asia recorded the fastest regional GDP growth in 2013, at 4.2 per cent – almost equal to its growth in the previous two years. Despite such rapid growth, many global investors have overlooked or underestimated the size of the Asian opportunity. The two rising economic superpowers – China and India – are both undergoing substantial reforms. If successful, these could greatly increase the appeal of investment trusts with a focus on Asia. A trend of consumerism is powering growth prospects and there is a burgeoning wealthy middle class buying into the western lifestyle. This is encouraging high domestic consumption, low debt and substantial savings. There is also a large, growing population that is pr ݚY[