By Mark McSherry
The Association of Investment Companies (AIC) have sent a “briefing note” to MSPs and Scottish MPs at Westminster to educate them on Scotland’s huge investment trust industry and set out “how policymakers could do more to support investment companies with tax and regulatory reforms.”
The AIC is a trade body for the UK closed-ended investment company sector. It represents 294 UK investment companies which manage assets of over £234 billion.
Dozens of these investment trust companies are managed by Scotland-based asset management firms including giants like Aberdeen and Baillie Gifford.
The AIC said Scottish investment trust companies account for more than half of all Scottish listed companies and represent roughly one-fifth of their total market capitalisation.
Scotland’s investment trust companies include Bailllie Gifford’s behemoth fund Scottish Mortgage, which manages assets of around £15 billion and is a prominent member the FTSE 100.
“Policymakers could do more to support investment companies, including the Scottish contingent, with tax and regulatory reforms,” said the AIC.
“These would help maintain and expand the Scottish investment company sector.”
The AIC said key reforms could include:
• Ending the practice of charging investors 0.5% of the value of the shares bought when they buy Scottish company shares. The same tax is not levied on non-UK shares.
• Increasing incentives to buy listed shares via individual savings account (ISA) reform. This would include reducing the amount of cash that can be saved and ending stamp duty on shares bought via ISAs (if a full removal of this charge is not introduced).
• Using the National Wealth Fund to sponsor investment companies with a remit to invest in Scottish businesses and infrastructure.
• Allowing VCTs (venture capital trusts) to invest in a wider range of small businesses seeking growth capital. This could support growth across the UK, including in Scotland.
“Closed-ended investment companies have deep roots in Scotland’s financial landscape,” wrote the AIC in its briefing note.
“The first, the Scottish American Investment Trust, now Dunedin Income Growth, was launched in Dundee in 1873.
“Others soon followed and continue to serve investors today. Alliance Witan, established in 1888, has since become a constituent of the FTSE 100.
“Scottish Mortgage, founded in 1909, offers exposure to quoted shares and private companies, manages around
£15 billion of assets and is also listed in the FTSE 100.
“These early pioneers not only established enduring institutions but also laid the groundwork for Scotland’s lasting reputation as a centre of investment expertise and innovation.
“Scottish investment companies account for more than half of all Scottish listed companies and represent roughly one-fifth of their total market capitalisation.
“Incorporated in Scotland, these companies are listed on the London Stock Exchange and invest across global markets.
“Their portfolios are managed by asset managers including Scottish stalwarts such as Baillie Gifford,
Aberforth Partners and Aberdeen Investments.
“These firms have strong reputations for their expertise and long-term outlook, attracting international capital and reinforcing Scotland’s standing as a hub for asset management.
“In doing so, they not only deliver for investors but also contribute to employment, innovation and the wider Scottish economy …
“Investment companies offer the potential for superior returns because of their long-term perspective and exposure to a wide range of assets. They also help diversify risk. These qualities help individuals grow their savings and strengthen their financial resilience.
“Investment companies’ approach to investing can align with broader policy goals, such as supporting business growth, job creation and innovation …
“The range of assets held by the sector is diverse. Many companies focus on listed equities, providing shareholders with exposure to businesses traded on the world’s major stock exchanges.
“Others specialise in private equity, opening the door to unlisted enterprises that would otherwise be inaccessible to individual investors.
“Scottish Mortgage exemplifies this approach, backing innovative, high-growth firms that have not yet gone public, such as SpaceX and ByteDance, giving shareholders unique access to transformative enterprises at an earlier stage.
“In a different vein, the Value and Indexed Property Income Trust illustrates the sector’s breadth by concentrating on real estate, with investments in leisure facilities, supermarkets, and industrial warehouses that generate steady income while underpinning the growth of e-commerce and modern supply chains.
“Venture Capital Trusts (VCTs) are a type of investment company which focuses on smaller, entrepreneurial businesses that often face challenges in raising finance.
“Maven Income and Growth VCT has backed Scottish small and medium sized enterprises (SMEs), in the technology, manufacturing and energy sectors. This has supported growth in industries that can support the country’s future prosperity.
“These strands illustrate the breadth and resilience of Scotland’s investment company sector. The industry continues to provide investors with access to diverse opportunities while reinforcing Scotland’s position as an international centre of financial expertise.”