Jefferies' Hose: Alternatives are the future of the investment trust sector

Where the growth is

Matthew Hose, investment companies researcher at Jefferies, has said alternatives-focused investment trusts - investing in illiquid assets including infrastructure, renewables and private equity - is an area he expects to grow further, thanks to strong performance in recent years and a greater opportunity for higher returns than conventional investment trusts.

Alternatives strategies only represented around 15% of the trust sector in the late 1990s but a changing market environment, increasing demand for income and a better understanding of the closed-ended structure and its suitability for investment in illiquid assets has seen this figure jump to around 50% today. However, alternative closed-ended vehicles still face a number of challenges, above all the perception they are too complicated. "Trusts are by definition more complicated than open-ended funds because they have more moving parts such as gearing, discounts and boards," said Hose...