Investment Trust

Trusts have a record of beating unit trusts, tend to have lower management fees, and their closed structure means they can more easily make long-term investments.  

On top of these qualities, they can also borrow money to invest, which can improve returns, and they can also hold back 15% of the income generated from their portfolios every year to build what is known as a “revenue reserve”.  

This is another key difference between investment trusts and traditional open-ended funds. It means in the good years they can put aside a bit of money to build a pot of cash they can dip into when the environment changes.  

As such, they are more likely to be able to maintain their dividends over the long term. Indeed, in 2020 when a large number of companies decided they were going to hold back their dividends in order to conserve cash in the pandemic, few trusts followed. They were able to dig into their revenue reserves and maintain shareholder distributions.