A new report shows there has been a shift in the ownership of investment trust companies away from wealth managers and towards institutions and private investors over the past two years.
The report from the Association of Investment Companies (AIC) analyses 89% of the industry’s market capitalisation. The AIC represents 331 investment trust companies managing £274 billion of assets.
It said institutions now hold 48% of the investment trust sector, private investors 26%, wealth managers 24% and adviser platforms 2%.
“Institutions’ share of investment companies has grown two percentage points since the end of 2022, from 46% to 48%,” said the AIC.
“Their share of alternative asset investment companies has grown particularly quickly, from 65% in 2022 to 72% according to the latest figures.
“Meanwhile, wealth managers hold 24% of the investment company sector, down from 27% in 2022. They hold 17% of alternative investment companies, a sharp decline from the 24% they held two years ago.
“Private investors hold 26% of investment company shares, versus 25% in 2022. Their stake in equity investment companies (those that invest in mainstream stocks and shares) has risen from 35% to 37% over that time.
“The share of the sector held by adviser platforms has fallen slightly to just over 2%.”
AIC CEO Richard Stone said: “Investment companies continue to attract a broad range of investors, but their shareholder base is changing.
“Wealth managers have been under pressure to sell investment companies due to the frustrating cost disclosure rules, which have made portfolios containing investment companies look artificially expensive.
“This has had a particularly acute impact on the alternatives sectors. Meanwhile, we’ve seen an increase in interest from investors attracted by deep discounts, including overseas investors, which has boosted the share held by institutions.
“Self-directed private investors are big holders of mainstream equity investment companies and continue to favour those that offer consistent and reliable income, holding 55% of the UK Equity Income sector for example. Their share of equity investment companies has increased over the past two years and is now running at 37%.”
The report said UK investors hold 74% of investment companies’ shares, with US investors accounting for 13%.
However, the shareholder base of alternative asset investment companies is more geographically diverse. Non-UK investors hold 40% of alternative asset investment companies, with US investors holding 25%, Swiss investors 3%, and a number of other countries accounting for 1% each including the Netherlands, Norway and Germany.
This is very different from equity investment companies, where UK investors account for 84% of shareholdings.
Stone added: “This data highlights the attractions of UK investment companies to investors across the world. Institutional investors from overseas have clearly seen the value in investment companies offering access to alternative assets, made all the more attractive by their discounts.
“These companies are giving access to illiquid alternatives in a way which simply does not exist in many markets. This strong overseas interest should be a wake-up call to domestic investors who have passed over these opportunities.”