What caught my eye this week.<\/em><\/p>\n T<\/span>here\u2019s a mildly titanic battle going on in the beleaguered UK investment trust<\/a> space.<\/p>\n Everything from the rise of index funds to the 2022 reset in interest rates to steady outflows from all UK equities \u2013 not to mention lousy performance in many cases \u2013 has left the sector littered with sub-scale funds trading on huge discounts<\/a>\u00a0to net assets.<\/p>\n Kicking the boot in were disclosure rules that made often high fees look ever higher. <\/span> That prompted wealth managers to abandon the sector in fear of fiduciary regulation violations.<\/p>\n But it\u2019s probably the unstoppable might of an S&P 500 tracker fund \u2013 or even just a global equities ETF \u2013 that has done the most damage.<\/p>\n Why own an old-fashioned investment vehicle with a board of directors and odd assets from all over the place when the simplest ETF has trampled your returns \u2013 and with less volatility for good measure?<\/p>\n No wonder even a bluest of the blue chips trust like RIT Capital Partners has traded for as much as 30%-off in recent times.<\/p>\n Or that I\u2019ve been drawn like a moth to this bin fire for multiple Monevator Moguls<\/em> articles<\/a> \u2013 and with many more to come I\u2019m sure.<\/p>\n Now if everything I just wrote made no sense to you then (a) congratulations, you\u2019re hopefully a passive investor<\/a> in cost-effective index funds and (b) you\u2019re part of the problem, from the other perspective.<\/p>\n You see, investment trusts were the original collective vehicles, invented more than 100 years ago to enable everyday investors to get exposure to much wider pools of assets at a far lower cost.<\/p>\n They were the global trackers<\/a> of their day. But the problem is that the global trackers of the day these days are, well, global trackers.<\/p>\n Even worse, attempts to recalibrate trusts towards more sophisticated investors by offering more exotic exposures have also come a-cropper.<\/p>\n In theory, investment trusts are the perfect vehicles to enable the ownership of more illiquid, unlisted, or esoteric assets, whether that be music royalties, wind farms, or warehouses for the logistics industry.<\/p>\n Investors don\u2019t really need these in their portfolio, but a case can be made for all of them.<\/p>\n Yet they\u2019re about as popular right now as a glass hammer in search of a nail. And as soon as their underlying assets face a problem \u2013 such as more competitive yields from government bonds \u2013 it seems investors dump these trusts. The discount widens and a potential death spiral begins.<\/p>\n So again, the dispassionate reading is these vehicles have outlived their usefulness. The market is telling us that.<\/p>\n As Brandon Lee said in The Crow<\/em>: \u201cThey\u2019re all dead. They just don\u2019t know it yet.\u201d\u00a0<\/em><\/p>\n Well maybe, but I\u2019m an investing romantic. Where you see a bunch of overpaid fund houses peddling unwanted products to a disinterested market that\u2019s moved on, I hear J.R.R. Tolkein.<\/p>\n One phrase keeps coming to mind from The Lord of the Rings.<\/em> The \u2018last alliance of elves and men\u2019<\/em> that united to defeat the dark Lord Sauron, who in Tolkein\u2019s mythology represents brutish and ugly modernity.<\/p>\n And conveniently, in the last year or so we\u2019ve been able to put a face on this fanciful clash. One Mr Boaz Weinstein of Saba Capital, an American hedge fund manager turned supervillain in the UK Investment Trust Cinematic Universe for his attempts to roll-up and extinguish seven of their number.<\/p>\n Weinstein is \u2013 conveniently for scriptwriters \u2013 a brash American, who dubbed his targets The Miserable Seven<\/a> amongst much else. It\u2019s fair to say both the press and the trust industry returned fire in kind.<\/p>\n Critics point out that Weinstein can see what many of us can see \u2013 that trusts trading at big discounts to their net assets are pregnant with value \u2013 only he wants to unlock it more for himself and his wider business aims.<\/p>\n Ironically, such discounted value has always been underwritten in investment trust lore by the potential of an activist to come along and liquidate a fund to release it, even if the possibility might often have seemed more theoretical than red in tooth and claw.<\/span><\/p>\n Yet now that Weinstein has set about doing it at scale, it\u2019s a different story.<\/p>\n To quote another suitably-geriatric screen legend: \u201cThey don\u2019t like it up them Mr Mainwaring.\u201d<\/em><\/p>\n I see and acknowledge everything above.<\/p>\n But as I said, unlike my purely passive co-blogger The Accumulator<\/em> I\u2019m an investing romantic.<\/p>\n And so I mentally punched the air this week when the first of these seven battles was resolved \u2013 with shareholders voting overwhelmingly<\/a> to reject Saba\u2019s takeover of the Herald Investment Trust.<\/p>\n A whopping 65% votes went against the hedge fund manager. Exclude Saba\u2019s own 35% stake and just 0.15% of shareholders sided with the enemy at the gates.<\/p>\n A last alliance of fund managers and ordinary investors indeed. Hargreaves Lansdown \u2013 which, like other platforms, has publicised and facilitated the votes \u2013 said<\/a> such engagement was \u2018unprecedented\u2019.<\/p>\n This, my friends, is the shareholder democracy that some say is being destroyed<\/a> by passive investing. Active funds that (ideally) strive to allocate money towards the best prospects, and engaged shareholders who (you\u2019d hope) care how and where their money is invested and managed.<\/p>\n Of course the Monevator<\/em> house view is that most of us shouldn\u2019t bother with any of this active malarkey.<\/p>\n That\u2019s because index funds can more cheaply hitchhike on the price-discovery efforts of active managers \u2013 or parasitically exploit them, if you prefer \u2013 and active investing is a zero sum game<\/a>.<\/p>\n The result is the average investing pound will do better in an index fund than in an active fund. Any big picture consequences are moot when it comes to growing your own wealth.<\/p>\n As for engaged shareholders, long-time readers may recall the research<\/a> that claimed it was the investors who checked their portfolios the least who saw the biggest gains \u2013 with the actually-dead doing best of all.<\/p>\n This house view hasn\u2019t changed. I\u2019m having fun on Moguls<\/em><\/a> with some like-minded souls, but as our motto says Moguls<\/em> is not for everyone. Me and TA<\/em> overwhelmingly believe that until proven otherwise, passive investing will be the best approach for the vast majority of individuals. There may eventually be issues if everyone invests passively, but game theory says until then do what\u2019s best for you.<\/p>\n And so this resistance to the supposed barbarian at the gate of the trust realm may really be a last alliance. A generation of likely older fuddy-duddies getting uppity about someone coming for their trusts \u2013 before the sector is flattened anyway by the inevitable victory of ETFs and index trackers.<\/p>\n Why fight it? They\u2019re all doomed.<\/p>\n Well, maybe. But I\u2019m an investing romantic and I was rooting for Gandalf and the gang outside the gates of Mordor. There\u2019s room for everyone, and I\u2019d miss these trusts were they to disappear.<\/p>\n One battle down. Six to go!<\/p>\n Have a great weekend.<\/p>\n Our updated guide to help you find the best online broker \u2013 Monevator<\/a><\/p>\n FIRE-side chat: better late than never \u2013 Monevator<\/a><\/p>\n From the archive-ator: Another good reason to open an ISA \u00a0\u2013 Monevator<\/a><\/p>\n Note: Some links are Google search results \u2013 in PC\/desktop view click through to read the article. Try privacy\/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.<\/em><\/p>\n British firms cutting jobs at fastest rate since 2009 \u2013 Proactive Investors<\/a><\/p>\n UK borrowing unexpectedly jumps \u2013 BBC<\/a><\/p>\n Cracks showing in Britain\u2019s reserve currency status \u2013 Reuters<\/a><\/p>\n Rachel Reeves backs looser limits on mortgage lending [Search result]<\/em> \u2013 FT<\/a><\/p>\n Hedge funds kept $1.8 trillion as fees; half their gains \u2013 Bloomberg via Y.F.<\/a><\/p>\n New rights for UK renters could come into force this spring \u2013 Which<\/a><\/p>\n Shein backlash fails to deter shoppers \u2013 BBC<\/a><\/p>\n Santander considers UK exit amid frustrations with high street banking \u2013 CNBC<\/a><\/p>\n Back to the office helps City of London\u2019s tallest tower to full capacity \u2013 City AM<\/a><\/p>\n GMO\u2019s new return forecast includes estimates if real rates contract \u2013 GMO<\/a><\/p>\n Gilts turmoil pushes up annuity rates to almost 7.5% \u2013 This Is Money<\/a><\/p>\n TSB bank switch offer: up to \u00a3160 + \u00a330 & NOW TV \u2013 Be Clever With Your Cash<\/a><\/p>\n Get up to \u00a31,500 cashback when you transfer your cash and\/or investments through this link<\/a>. Terms apply \u2013\u00a0Charles Stanley<\/a><\/p>\n Does your insurance cover damage caused by bad weather? \u2013 Which<\/a><\/p>\n How to buy leasehold and avoid \u2018fleecehold\u2019 [Search result]<\/em> \u2013 FT<\/a><\/p>\n Spike in borrowers in their 30s taking on ultra-long mortgages \u2013 This Is Money<\/a><\/p>\n Open an account with low-cost platform InvestEngine via our link<\/a> and get up to \u00a3100 when you invest at least \u00a3100 (T&Cs apply. Capital at risk) \u2013 InvestEngine<\/a><\/p>\n Barclays the latest lender to bump up mortgage rates \u2013 This Is Money<\/a><\/p>\n Our friends electric, and gas \u2013 Getting Minted<\/a><\/p>\n Homes for sale for doer-uppers, in pictures \u2013 Guardian<\/a><\/p>\n The stock market is both a voting and a weighing machine \u2013 Morningstar<\/a><\/p>\n Is there a problem with passive investing? \u2013 Of Dollars and Data<\/a><\/p>\n Active ETFs are an extremely clever wheeze \u2013 FT<\/a><\/p>\n Investing is hard \u2013 Behavioural Investment<\/a><\/p>\n Gen Z Americans leaving European cousins in the dust [Search result]<\/em> \u2013 FT<\/a><\/p>\n The devolution of US public capital markets \u2013 Cullen Roche<\/a><\/p>\n Money grows up \u2013 Humble Dollar<\/a><\/p>\n Time to lock-in 5% bond yields? [US but relevant]<\/em> \u2013 A.W.O.C.S.<\/a><\/p>\n Estimating the probability of dementia \u2013 Oblivious Investor<\/a><\/p>\n \u201cFIRE first, then a house\u201d<\/em> \u2013 Strong Money<\/a><\/p>\n Are you resilient? \u2013 Can I Retire Yet<\/a><\/p>\n Jonathan Clements on indexing, investment writing, and death [Podcast]<\/em> \u2013 M.I.B. via Apple<\/a><\/p>\n Investors lose their appetite for the obesity trade \u2013 FT<\/a><\/p>\n Three reasons to buy bonds [US but relevant]<\/em> \u2013 Animal Spirits via Apple<\/a><\/p>\n VC-backed unicorns still waiting for the exit lane to open \u2013 Institutional Investor<\/a><\/p>\n Forecasting returns for 2025 for the UK stock market \u2013 UK Dividend Stocks<\/a><\/p>\n 14% a year? The cost of being entertained by thematic funds \u2013 Morningstar<\/a><\/p>\n Trump and the return to an inflationary era \u2013 The Bonddad<\/a><\/p>\n The state of the video games industry in 2025 [Slides]<\/em> \u2013 Matthew Ball<\/a><\/p>\n More than 10,000 millionaires have left UK, says one analyst \u2013 Standard<\/a><\/p>\n Britain to soften non-dom tax rule changes following exodus \u2013 CNBC<\/a><\/p>\n Wealth of world\u2019s billionaires grew by $2tn in 2024, report finds \u2013 Guardian<\/a><\/p>\n The persistence of elite wealth in American history [Research]<\/em> \u2013 NBER<\/a><\/p>\n Reeves is alienating wealthy entrepreneurs who bring jobs \u2013 Independent<\/a><\/p>\n Saving Time<\/em>\u00a0by Jenny Odell \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n The Black Swan<\/em>\u00a0by Nassim Taleb \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n Good With Money<\/em>\u00a0by Emma Edwards \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n Number Go Up: Inside Crypto\u2026<\/em>\u00a0by Zeke Faux \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n The impact of renewable energy on electricity costs \u2013 Klement on Investing<\/a><\/p>\n Great Barrier Reef hit by most widespread bleaching event ever \u2013 Guardian<\/a><\/p>\n Trump halts $300bn in US green infrastructure spending [Search result]<\/em> \u2013 FT<\/a><\/p>\n Toads on the roads \u2013 Biographic<\/a><\/p>\n The madcap rise of memecoin factory pump.fun \u2013 Wired<\/a><\/p>\n Your memecoin is your slush fund \u2013 Noahpinion<\/a><\/p>\n Trumpcoin and TikTok \u2013 Kyla Scanlon<\/a><\/p>\n Try China\u2019s DeepSeek<\/em>, which may be smarter than OpenAI\u2019s AI \u2013 Mashable<\/a><\/p>\n Tips on using AI in your own work \u2013 Darius Foroux<\/a><\/p>\n Announcing the Stargate Project \u2013 OpenAI<\/a> [and bashing<\/a> it]<\/em><\/p>\n How we can use AI to create a better society \u2013 FT<\/a><\/p>\n Anthropic CEO sees a \u2018country of geniuses in a data centre\u2019 \u2013 Business Insider<\/a><\/p>\n How GenAI is coming for [what\u2019s left of]<\/em> media [Slides]<\/em> \u2013 Doug Shapiro<\/a><\/p>\n AI\u2019s latest model will change economics of software [Paywall]<\/em> \u2013 Economist<\/a><\/p>\n If you want to live a quiet life, live a quiet life \u2013 Susan Cain<\/a><\/p>\n The \u2018masculinity crisis\u2019 is actually a crisis of self-esteem \u2013 Psyche<\/a><\/p>\n Oliver Burkeman on the imperfect life \u2013 Behavioural Scientist<\/a><\/p>\n California Dreaming \u2013 Scott Sumner<\/a> [h\/t Abnormal Returns<\/a>]<\/em><\/p>\n Which music was under-appreciated in its time? \u2013 Stat Significant<\/a><\/p>\n Elon Musk has been paying to level-up his video game characters \u2013 Futurism<\/a><\/p>\n The best time to eat dinner, according to longevity experts \u2013 GQ<\/a><\/p>\n \u201cIt could be Marvel\u201d<\/em>: Games Workshop and its big ambitions \u2013 BBC<\/a><\/p>\n Long-term bullish on the Middle East \u2013 Noapinion<\/a><\/p>\n Principles \u2013 Nabeel S. Qureshi<\/a><\/p>\n On fleeing the inferno \u2013 More To That<\/a><\/p>\n \u201cLook at your cash everyday if you wish, your bonds every couple of years, and your equities every ten years! Really, do not look at your performance more than once a year.\u201d Like these links? Subscribe<\/a> to get them every Friday. Note this article includes affiliate links, such as from Amazon<\/a> and Interactive Investor<\/a>.<\/em><\/p>\nMy precious<\/h3>\n
They have a cave troll<\/h3>\n
All that is gold does not glitter<\/h3>\n
Even the very wise cannot see all ends<\/h3>\n
From Monevator<\/h3>\n
News<\/h3>\n
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<\/a><\/p>\nProducts and services<\/h3>\n
Comment and opinion<\/h3>\n
Naughty corner: Active antics<\/h3>\n
Rather rich mini-special<\/h3>\n
Kindle book bargains<\/h3>\n
Environmental factors<\/h3>\n
Crypto o\u2019 crypto mini-special<\/h3>\n
Robot overlord roundup<\/h3>\n
The living isn\u2019t easy mini-special<\/h3>\n
Off our beat<\/h3>\n
And finally\u2026<\/h3>\n
\u2013 Tim Hale, Smarter Investing<\/em><\/a><\/p>\n