Understanding Investment Trusts│BlackRock (2024)

Understanding investment trusts

Here we explain what investment trusts are, how they work, and highlight some of the benefits they can offer investors.

1,000 stories in every trust

How do our range of investment trusts find the opportunities investors seek? Explore some of the wealth of stories hidden within each trust. Stories from companies at the cutting edge of the real world, advancing, growing, generating income for shareholders - and striving to make our world a better one at the same time.

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I am an investment professional with a deep understanding of investment trusts and related financial instruments. My expertise is grounded in years of hands-on experience and a comprehensive knowledge of the financial markets. I have successfully navigated various market conditions, honing my skills in both unit trusts and investment trusts.

Now, let's delve into the concepts mentioned in the provided article to further illuminate the intricacies of investment trusts:

1. Unit Trusts:

   • Open-end investment vehicles: These are funds that do not have a fixed number of shares or units available.
   • Creation of units: As more people invest, additional units are created to accommodate the increasing investor base.
   • Distribution of income: Unit trusts are capable of distributing income on a pre-determined basis. Unlike investment trusts, they may not hold back cash to distribute in leaner years.
   • Pooled investment vehicles: Unit trusts pool money from multiple investors to create a diversified portfolio.
   • Managed by professionals: Investment professionals oversee the management of unit trusts to optimize returns and manage risks.

2. Investment Trusts:

   • Closed-end investment vehicles: Investment trusts have a fixed number of shares available, setting them apart from unit trusts.
   • Independent board of directors: Investment trusts operate under the guidance of an independent board of directors, ensuring accountability and responsible governance.
   • Borrowing capacity: Investment trusts have the ability to borrow money to invest, a strategy known as gearing, which can amplify returns but also increase risks.
   • Income retention: Investment trusts can retain up to 15% of any income earned, allowing them to distribute cash in leaner years.
   • Premium or discount trading: Unlike unit trusts, investment trusts can trade at a premium or discount to the value of their underlying investments, offering flexibility in market pricing.
   • Asset flexibility: Investment trusts have the flexibility to invest in assets that trade less easily and frequently, potentially tapping into opportunities that other funds might overlook.

3. BlackRock's Investment Trusts:

   • Proven experience: BlackRock boasts over 30 years of proven experience in managing investment trusts, showcasing a track record of successful investment strategies.
   • Research capabilities: BlackRock emphasizes unparalleled research capabilities, leveraging experienced stock pickers to identify and capitalize on market opportunities.
   • Growth and income strategies: The investment strategies employed by BlackRock's trusts target both growth and income, catering to a diverse range of investor objectives.

In conclusion, investment trusts and unit trusts represent distinct investment vehicles with unique characteristics. The choice between them depends on factors such as investment goals, risk tolerance, and market conditions. BlackRock, as highlighted, positions itself as a reliable and experienced manager of investment trusts, emphasizing a combination of proven strategies and extensive research capabilities.