Just as the AITC before it, the IMA says proposals to cap cross-holdings between investment trust co...
Just as the AITC before it, the IMA says proposals to cap cross-holdings between investment trust companies will need to be developed with great care in order not to penalise legitimate investment strategies.
Some of the proposals to change the listing rules, as prescribed by CP164, are seen as limiting investment companies from developing funds of funds strategies or from investing in funds of funds products in order to manage risk or offer investors an alternative to plain vanilla investment funds.
The limits have been proposed because of the antics of the so-called "magic circle" of split capital investment trusts that led to multiple gearing effects and loss of control over risk within investment trusts investing in each other.
Unlike the AITC, however, the IMA seems to take a stronger stance against FSA proposals for increased transparency through the monthly publication of portfolio data.
The IMA says forcing investment companies to publish all the details of their portfolios every month would result in "a deluge of data but no meaningful information" for shareholders.
Most importantly, the IMA firmly rejects proposals to bring investment trusts under the same umbrella as open ended funds as Collective Investment Schemes.
It says that the different markets served as well as the additional flexibility currently offered investment trusts in their capacity as listed companies would not be best served by putting them into the same regulatory framework as unit trusts and OEICS.
That will be music to the ears of many boards of trusts, where members feel hard done by the actions of those involved in split capital funds – the reason the FSA is cracking down on the sector in the first place.
The AITC proposed last month in its reply to CP164 that new limits be placed on employees of trusts also sitting on boards, but overall continues to feel that applying Collective Investment Scheme status or any other regime should not be done if there are no improvements in consumer protection or any other tangible benefits.
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