The thing I like about listed investment trusts is also the thing I dislike about them.
Unlike a normal unit trust they are closed ended, meaning you are protected from mass redemptions, and panic selling when the market goes down. Good, right?
But then you are also susceptible to the dreaded premium/discount saga that is usually confined to listed investment companies. Which means you may buy when its at a premium and sell when at a discount... Not good, rIght?
From a tax perspective it is still ultimately a trust, so all net income has to be paid out each year. For some people this is a bonus, the guarantee of being paid all earnings, others like the benefits of being able to streamline dividends.. much like a LIC can.
Others will try to emphasise the loss/reductIon in frankIng credits. Biggest myth goIng around. UltImately you either receive more in the hand and pay more tax or receive less and pay less tax. Either way the same tax is paid and you receive the same.
On a side note, and purely from a legal perspectIve on trusts, I have an issue wIth closed end vehicles, where you cant redeem your units being called a trust. Yes, they are required to dIstribute all net income, but ultImately the capital or corpus of the fund can't be touched. Besides the requirement to dIstribute net Income, they are more lIke a company than a trust... your money is bound to the market and someone wIllIng to buy your unIts.
The very nature of a trust, having an equitable Interest In both the "capital" and income of the trust... is absent wIth Listed Investment trusts... ultImately, you have no rIghts with regards to the capital of the fund. You can't redeem your units... the capital Is locked up.
