Brave new world for trusts as investors get a chance to bet on the technology of the future: RUTH SUNDERLAND
FTSE 100 member Scottish Mortgage is a powerful example of why investment trusts exist and why they are such a valuable part of the UK stock market.The sober name belies the raciness of the trust which bets on high-risk, high-potential companies, notably Elon Musk’s Space X, its biggest holding. Others include AI giant Anthropic and payments business Stripe.It took stakes in these businesses as private companies, ahead of any stock market listing, which is when some big gains can be made before everyone else piles in.As anyone reading the Space X float prospectus last week would recognise, this is risky. Private investors should not buy into Scottish Mortgage and its ilk unless they have a buffer of cash, other potentially less volatile assets in their portfolio and a long-term attitude.But if you are the kind of person who relishes the chance to bet on revolutionary technology of the future, investment trusts offer a unique opportunity.Because of their ‘closed-end’ structure they can take a patient view: they are not forced to sell if values fall, unlike the ill-starred Neil Woodford with his collapsed funds. They are not constrained by the requirement to track an index, unlike many ‘passive’ funds. technology shift: Scottish Mortgage has said its holding in Space X has brought huge returns for investorsAs the managers of Scottish Mortgage put it: a long-term philosophy means they can be willing to look foolish in the short run. They believe that, as Trump’s tariffs and the closure of the Strait of Hormuz demonstrate, the old order is being dismantled as a new global, and extra-terrestrial, economy is being constructed.Their contention is that, while there will certainly be losers, the biggest risk as an investor is to sit on the sidelines and miss out on all the potential growth.For those who find Scottish Mortgage too exciting, there are plenty of other, more pedestrian investment trusts.Even better, investment trust charges tend to be low. There are very few ways modest investors, anywhere in the world, can gain access to exciting and diversified assets in easily traded funds, at low-cost.The sector is an undersung part of the London market: it has taken the predatory attentions of an American corporate raider, Boaz Weinstein of Saba, to put it in the spotlight. It’s too late for some of his targets, but not too late to start appreciating investment trusts.Not so slickAlbert Manifold has been a keen apiarist since childhood – but still got on the wrong side of BP’s Queen Bees, foremost among them new boss Meg O’Neill.He is hitting back hard against the characterisation as ‘shouty’ and at reports of bullying. There must be a risk of a lawsuit, with the prospect of further unedifying publicity for the oil giant.Whatever the rights and wrongs, being chairman of BP requires high-level diplomatic skills, to be deployed with the likes of Vladimir Putin, Donald Trump and Middle Eastern potentates. A row with one’s own colleagues is therefore not ideal.Who might be a good replacement?Tony Blair, who was on the radio yesterday opining about the Labour leadership, would be a left-field candidate – pun intended. He has the connections, the suavity and a precedent in his former adviser Anji Hunter, who went on to be a top spin doctor at BP.Only kidding! But the latest boardroom drama has led some to speculate that BP, like Britain, is becoming ungovernable.Whoever takes over as chairman will have a less daunting task than that faced by the next Prime Minister, but perhaps not by much.Doesn’t add upSpeaking of former prime ministers, Rishi Sunak is right to champion financial literacy. Understanding compound returns, inflation and portfolio diversification – the areas he advocates – are a start.People are now expected to deal with complex personal finances, particularly stock market-linked workplace pensions. Social media abounds with ‘fin-fluencers’ dispensing ‘advice’ – much of it dubious.But nine out of ten of us do not have a professional financial adviser, partly because it is perceived as expensive.There is no obvious ideal solution. But anyone wanting to improve their understanding, avoid rip-offs and get richer could start by reading my excellent colleagues on the personal finance and money pages.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
