Not all investment trusts will benefit from RDR, says Winterflood

Platforms will play a key part in whether investment trust sales will benefit from the implementation of the retail distribution review (RDR), according to Winterflood Investment Trusts.

Simon Elliott
Simon Elliott

The role of platforms – which accounted for 66% of net retail flows in 2011 – is likely to grow after the implementation of the RDR, says Simon Elliott, head of research.

The RDR will remove commission for independent financial advisers (IFAs), increasing the appeal of investment trusts, which have traditionally not paid commission.

Investment trusts are not available on Skandia, Cofunds or FundsNetwork, “which, in aggregate, account for 70% of the market”, says Elliott.

“Negotiations have been underway for some time and the hope is that there will be positive developments in the first half of 2012,” he says.

However, analysts at Winterflood have warned that not all investment trusts will benefit from the RDR.

Demand for “well managed, high profile” investment trusts with strong track records will increase, says Winterflood’s Elliott.

“Our view is that not all investment trust companies will benefit from RDR. Indeed for a large number of funds there is unlikely to be any noticeable change,” says the head of research.

“However, we believe that there are some funds that should attract additional retail interest.”

He adds: “With the IFA community continuing to undergo significant changes in terms of ownership and demand for qualifications, it is safe to assume that investment trusts may not be the number one priority.

“However, unlike other sector commentators, we do see RDR as a significant opportunity for the industry that could provide additional demand for some of the stronger funds in the sector.”

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