But Yearsley says liquidity is an issue here as well, not because the shares cannot be sold, but around the price at which one can sell them. He says that it would be difficult to sell £50m worth of shares in almost any investment trust in one day without seeing the price fall markedly.
This has consequences for clients, as the earlier client may get a higher price than the subsequent one, even though they are in the same investments in the same portfolio.
Warraich is a little more optimistic than Yearsley regarding the ability to sell big lots of investment trust shares, particularly if the trust is £1bn in size or larger, but says the problem he has with allocating to smaller trusts is that often one cannot buy enough shares quickly for all the clients in a particular portfolio.
For King, whose Vermeer Partners is a much smaller business than the giants of the industry, the chance to buy investment trusts is one of the ways smaller companies can deliver better investment returns than some larger rivals.
But whether an inability to launch new funds is a problem for clients is itself debatable, says Yearsley, who contends that there are “already too many funds, we don’t really need any new ones”.
Hollands says there are too many investment trusts and so consolidation in that market would be “welcome”.
David Thorpe is special projects editor of FTAdviser
