Citywire ISA Guide: Investment trust picks

Investment trusts gather fans in the same was as Apple Macs do.

A certain type of person buys investment trusts just like a certain type of person buys an Apple Mac and those that do argue that their choices are vastly superior to more mainstream equivalents.

These afficionados argue that investment trusts have many benefits over open-ended funds like unit trusts and Oeics.

Among the advantages is that they are often cheaper to invest in, with much lower fees being paid to the fund managers. They also offer fund managers the chance to invest without the worry that the money they hold might suddenly be withdrawn.

This is because as investment trusts are listed companies, investors buy shares. To sell their holding they must sell their shares on the open market. Of course the changing hands of the shares does not affect what the fund manager does with the underlying money oralter the amount of money they have to manage.

The other major advantage is that fund managers can take on debt in an investment trust. This means that if they have conviction that the stockmarket is going to go up, they can take out a loan because they believe they can generate more money than the debt costs. This effectively provides another gear for investment trusts climbing a rising market, which unit trusts cannot use. Of course if they get it wrong it can be costly.

You can read our guide to investment trusts here. To buy an ISA investment in an investment trust investors can either use savings schemes offered by the fund management companies running the trusts or use an independent ISA provider such as Alliance Trust.

Citywire's three picks for investment trust ISAs are all long-term bets. Investors should be aware that in difficult markets, such as the current volatile conditions, investment trusts could fall in value more than unit trusts. The share price of investment trusts can often end up being less than the underlying assets the company holds. This is known as being on a 'discount'. For some this represents a cheap way into top-notch investments, but it is also an added risk.

, managed by Duncan Bridge and David Haysey

The remit of RIT Capital Partners Investment Trust is to invest across the world in a variety of different asset classes so it can act as a complete portfolio in its own right.