Are dividend reserves giving ITs an edge?

FE's Joshua Ausden outlines one of the biggest advantages closed-ended funds have over their open-ended counterparts, and highlights the investment trusts that benefit most.

The significant outperformance of trusts versus open-ended funds over the long term has led to an increasing number of admirers. Trusts' ability to gear, take higher conviction positions, and benefit from narrowing discounts have all played their part, and are, unsurprisingly, the most well-documented benefits of the structure. Closed-ended funds tend to be preferred by long-term investors, and many rely on them for income to meet their retirement needs. On the one hand, this is counterintuitive, as investment trusts tend to be more volatile than their open-ended counterparts, which c...