Glossary · Fund structure
Investment trust
A company listed on the stock exchange whose business is investing in other assets. Its shares trade at a market price that can differ from the value of what it owns.
An investment trust is closed-ended: it has a set number of shares, which investors buy from and sell to each other on the stock exchange. The manager does not have to sell holdings when investors leave, which is one reason trusts can hold less-liquid assets such as property or unlisted companies.
The share price is set by supply and demand, so it can sit below the net asset value per share (a discount) or above it (a premium). A holder can lose money when a discount widens even if the trust’s holdings have not fallen.
Trusts can borrow to invest, known as gearing, which makes gains and losses larger, and each has a board of directors accountable to its shareholders. On this site, returns for investment trusts are the change in share price, which leaves out dividends paid out.
On Fundology: Investment trusts
Related terms
- NAVThe per-unit value of a fund’s assets after its liabilities, normally struck once per day.
- OEICA UK fund set up as a company that creates or cancels shares as money comes in or goes out, priced once a day at the value of what it holds.
- Specialist Fund SegmentThe part of the London Stock Exchange for specialist closed-end investment funds aimed at institutional, professional, professionally advised and knowledgeable investors.
- Total returnThe return of an investment including income (dividends or interest), not just the change in price.
More terms on fund structure
Definitions describe how a term is used on Fundology. This is information, not advice.