Winterflood’s Innes Urquhart and Oriel Securities’ Iain Scouller think that larger trusts run by a manager with a proven track record will benefit in a world of fee-based financial advice.
However, neither of the closed-ended experts thinks RDR will have much of an effect on the smaller, more risky trusts, because of concerns over liquidity.
"Our position is that not all investment trusts will benefit from RDR," Urquhart said.
"I think investors will probably head towards the larger, more liquid trusts that have a good long track record. Also, I think a good and well-known manager will be key."
Scouller added: "You would hope that there would be more interest in the bigger trusts."
"I think investors will certainly want liquidity. Advisers are likely to look for what they perceive to be the least risky or volatile sector and then pick out the biggest and most well-known trusts."
"I doubt if emerging markets, smaller companies or private equity trusts will see much of an uptick in demand though."
Here are five investment trusts that Urquhart and Scouller think should benefit from the new regulations.
Murray International Trust
Aberdeen’s multi-million pound Murray International Trust is one of the best-known closed-ended funds on the market and both Urquhart and Scouller think it will be in high demand.
Managed by industry stalwart Bruce Stout, it has been the best-performing trust in the IT Global Growth & Income sector over the last 10 years, with returns of 444.07 per cent.
Performance of trust vs index over 10-yrs
Source: FE Analytics
It has easily beaten its benchmark – the FTSE World ex UK index – which has returned 148.41 per cent over the same period. It has also outperformed the index over the last three and five years, but slightly lags behind over 12 months.
The trust has tended to be less volatile than its benchmark over the longer term, but has a higher annualised volatility than the FTSE World ex UK index over one and three years.
Urquhart says that investors should be aware that Murray International is currently trading on a 6 per cent premium.
It has a gearing of 10.1 per cent and an ongoing charges figure of 0.75 per cent.
Scottish Mortgage IT
James Anderson’s Scottish Mortgage IT is another trust that both Scouller and Urquhart think will benefit from RDR.
The trust has been managed by the long-serving Anderson since 2000 and has consistently beaten its FTSE All World index and topped the IT Global Growth sector over this time.
Urqhart commented: "Scottish Mortgage is trading on a 7 per cent discount, which has come in from around an average of 10 per cent. However, whether that is due to the impact of RDR remains to be seen."
The £2.4bn trust is heavily geared at 16 per cent and has ongoing charges figure of 0.51 per cent.
Personal Assets Trust
The simple structure of Sebastian Lyon’s Personal Assets Trust will make it popular with retail investors, according to Urquhart.
"Personal Assets Trust has a zero-discount policy, so it never really strays away from its NAV," he explained.
Urquhart also points out that it has no gearing.
FE Alpha Manager Lyon took over the closed-ended fund in March 2009. Since that time, it has underperformed against the FTSE All Share, even though it has delivered 76.15 per cent.
Performance of trust vs index since March 2009
Source: FE Analytics
Personal Assets Trust has been far less volatile than the index since Lyon took over, however, which again Urquhart thinks will appeal to advisers and retail investors.
The £560m trust has an ongoing charges figure of 1.01 per cent.
Foreign and Colonial Trust
Scouller highlights the Foreign and Colonial IT – which is currently trading on a 10 per cent discount – as a trust that will attract attention from more retail investors this year.
The £2.4bn portfolio has been managed by Jeremy Tigue for more than 15 years. Our data shows it has beaten the FTSE World Europe ex UK index over the last three, five and 10 years.
It has a particularly good five-year track record – its return of 32.09 per cent is nearly double that of its benchmark. The trust also has a lower annualised volatility than its benchmark over the last three, five and 10 years.
Foreign and Colonial has an ongoing charges figure of 0.92 per cent and is 15 per cent geared.
Templeton Emerging Markets
Although Scouller thinks investors may avoid trusts that focus on emerging markets, Urquhart thinks that due to its size and the manager’s reputation, the Templeton Emerging Markets IT will be one of the few that attracts retail interest.
The £2.1bn Templeton Emerging Markets trust has been managed by FE Alpha Manager Dr Mark Mobius since its launch in 1989.
It has returned 624.78 per cent over the last decade, considerably beating its benchmark – the MSCI Emerging Markets index – which has returned 381 per cent over the same period.
Performance of trust vs index over 10-yrs
Source: FE Analytics
Although the trust has tended to be more volatile than the index across the major time frames, it has beaten its benchmark over the last three and five years as well.
According to Urquhart, the Franklin Templeton Emerging Markets IT does not use any gearing and is currently trading on a 7 per cent discount to NAV.
The trust’s ongoing charges figure is 1.31 per cent.