Fund supermarket Hargreaves Lansdown is continuing to shun investment trusts despite bolstering its research into the sector over the past year.
Ahead of the Retail Distribution Review (RDR) last year, Hargreaves strengthened its coverage of the closed-ended universe in a drive to give its clients a more comprehensive overview of the sector.
However, seven months into the post-RDR world, the firm said the removal of trail commission has not changed its view there are too many drawbacks and risks associated with the listed vehicles.
Lee Gardhouse, investment director and head of investments at the firm, said liquidity remains in short supply for large scale fund buyers.
For this reason, the group will not begin recommending the sector, despite the fact there is now a level playing field in terms of charges.
"The problem we have is there are only a handful of trusts we can pump £50m-£100m into if we saw an opportunity to invest - the closed-ended sector is unbelievably illiquid, even for a relatively small amount of money.
"We have boosted our research into the sector and met a number of investment trust managers to give our clients more information about investment trusts if they want it, but we are still not recommending them as we are terrified about liquidity."
Gardhouse outlined a number of other problems associated with the sector, which puts the group off recommending these products.
He argues many investment trusts NAVs are not recorded on a daily basis, which makes it difficult to gauge a company's valuation.
He added the vehicles are also more volatile than their open-ended peers due to the fact they are listed vehicles.
"Investment trusts can rapidly switch from a premium to a discount, so clients investing in a portfolio of low risk assets can actually end up in volatile vehicles."
Hargreaves Lansdown offers more than 400 investment trusts on its platform, but no listed vehicles feature on the firm's influential Wealth 150 list or in its £3.1bn multi-manager range.
Despite improved risk appetite
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