The Great Debate UK
Well-intentioned legislation often has the opposite effect. The European Commission’s new alternative investment directive threatens investment trust companies, an attractive form of pooled investment.
The Commission aims to “enhance investor protection.” However, in addition to hedge funds, the original French and German target, investment trusts would be caught in the new regulatory net. Unlike other pooled funds, investment trusts offer transparency, low fees, the discipline of a public limited company and a vote.
For retail investors, trusts offer a cheap and easy way to diversify their investments. Because they are PLCs, they are subject to the British Companies Act, and the directive offers nothing by way of improvement. Moreover, it would impose obligations that may be impossible to meet.
Investment trusts have been around since 1868, when Foreign & Colonial enabled individuals to put money into the United States. Now, some 434 London-listed trusts manage around 75 billion pounds. They allow investors to put money into India and China, private equity, property, collateralised loan obligations and every other corner of the market.