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Investment Trust Portfolio: Seeking the right balance

John Baron checks the portfolios’ inflation-readiness but first hails a regulation success
Investment Trust Portfolio: Seeking the right balancePublished on December 13, 2022

Readers will be aware from previous columns, including ‘Of testing markets and troublesome KIDs’ (IC, 11 Sep 2020), and perhaps from their own experience, of the real concern within the investment trust industry about Key Information Documents (KIDs). The EU’s core retail financial services regulations – known as Packaged Retail and Insurance-based Investment Products (PRIIPS) – had KIDs at their heart which every investment trust has had to produce.

These regulations were poor and even dangerous. The central problem has been that KIDs can be very misleading regarding the assessment of risk, the projection of returns and the comparison with open-ended ‘sister’ funds. There was no balanced approach. Little wonder the media, consumer champions and industry generally have been critical, believing them to be potentially harmful to investors. The Association of Investment Companies (AIC), the sector’s respected trade body, advised investors to ‘burn before reading’.

I raised the issue directly in meetings with the capable John Glen MP, the then economic secretary to the Treasury, and with Andrew Bailey, the then chief executive of the Financial Conduct Authority (FCA). Both realised the extent of the problem. The FCA launched a Call for Input consultation but the EU was unsympathetic to the investment trust cause. Last week, as part of The Edinburgh Reforms seeking to capitalise on the freedoms from no longer being in the EU, the government proposed abolishing the PRIIPS Regulation.

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