The Association of Investment Trust Companies has sent a letter to all boards of split capital inves...
The Association of Investment Trust Companies has sent a letter to all boards of split capital investment trusts asking them to approve a new plan that would result in unprecedented investor access to data on holdings within their funds, including all sub-funds, cross-holdings and latest gearing levels.
The letter comes just as the splits issue has been highlighted by the national broadcast of a highly critical television program, which alleges investment companies such as Aberdeen Asset Management and its 'Mr Splits' Chris Fishwick have frittered away billions of pounds of investors' money - hitting the elderly and retired particularly hard.
The AITC says it cannot comment on behalf of individual members, but its letter indicates the level of concern felt by the entire investment trust community over an issue that is tarring many relatively solid products and well-performing fund managers with the same brush as those splits now effectively bankrupted.
"The sector clearly wants to avoid the danger of investors buying shares without a proper appreciation of the risks involved," the letter says.
Publishing more detailed data on splits values and holdings "would eliminate or at least substantially reduce the risk of the sector being accused of misselling or worse if substantial losses were subsequently sustained."
At the core of the new proposal is the outsourcing of data collection to Fundamental Data, which would publish online a detailed breakdown of all holdings in other investment companies by value.
It would also publish details of cross-holdings in other splits, ratios of bank debt, and a breakdown of sub-portfolios.
Investors would be able to use the compiled data to "derive their own assumptions for income and capital returns for the whole portfolio," the letter says.
"These could be applied to the matrix of final NAVs and redemption yields thus enabling investors and advisers to gain a proper understanding as to whether a particular share offers risk:reward characteristics that meet their own objectives, needs and appetite for risk."
Of particular interest would be the data on hurdle rates, which the AITC is proposing would be published daily for each class of share.
This would make clear the level of performance needed from the portfolio of any individual fund in order to meet the objectives of investors, the letter says.
"The hurdle rates would be published to show the capital returns required from the portfolio to result in (depending on the share class): total loss, current share price, initial subscription price, final entitlement."
"Final NAVs and redemption yields, updated daily,…would enable investors to understand more easily how sensitive their potential returns may be to relatively small changes in the performance of the underlying portfolio."
The AITC adds that there may also be cases where similar data would need to be published for sub-funds to "help investors take an intelligent view on the likely outcomes for themselves."
The new proposal comes as the AITC looks to complete another data collection process started in March this year to collect full portfolio lists and gearing details from splits.
The association says a model has now been developed on this information that should be able to provide information on breakup NAVs, gearing, expenses, and capital and revenue returns for different share classes.
This model is going to be proposed to boards of splits by the end of November, and the AITC says that it hopes to get clearance to publish and update this data on a monthly basis.
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