Your reporters Sally Hickey and Costas Mourselas should be congratulated for their article summarising the current plight of the investment trust sector in the UK (“Hedge funds circle struggling UK investment trust sector”, Report, FT Weekend, April 6). I did, though, wish to offer some additional reasons why the UK government might consider action that could help this sector.
First, it is important to recall that the government has stated that it wishes to stimulate investment in high-growth, unlisted UK companies. Indeed, chancellor Jeremy Hunt’s 2023 Mansion House compact set out to do just that with regard to defined contribution schemes.
Currently, there are several investment trust vehicles that allow retail investors to invest in unlisted companies. This is much more difficult to facilitate within other commonly used retail vehicles such as exchange traded funds or unit trusts.
Second, many would favour more “long-termism” in investment decisions. The “permanent capital” provided to investment trusts allows the portfolio manager to invest for the long term without having to worry about short-term outflows.
This is not a luxury afforded to managers of unit trusts or exchange traded funds. A UK government that is committed to stimulating economic growth should wish to encourage a sector that makes the adoption of “long-termist” attitudes more likely.
In the light of these advantages associated with having an investment trust sector, it is very odd that the way in which the stamp duty reserve tax works penalises the acquisition of holdings in investment trusts, versus obtaining equivalent exposure within a unit trust or an exchange traded fund.
The UK government should seriously consider creating a level playing field in this regard. This should be in addition to the work that is already being done in the regulatory arena that your article refers to.
Sushil Wadhwani
London SE21, UK
