Why choose ITs over OEICs?

[MrFoolish]

Do the directors do any of the admin, accounts and/or legal stuff in running the company - or is their role more strategic?

No. They have people to fill those functions, like the Company Secretary. They oversee those who are running the company.

TJH

Well it does seem to me they show up once in a while and scratch their chins.

OK, they might do some buy-backs, but that's probably a wave finger in air type decision (12% discount? Go for it). And they could change the fund manager, but they probably won't. Genuine question - how many hours a week do they put in?

[tjh290633]

No. They have people to fill those functions, like the Company Secretary. They oversee those who are running the company.

TJH

Well it does seem to me they show up once in a while and scratch their chins.

OK, they might do some buy-backs, but that's probably a wave finger in air type decision (12% discount? Go for it). And they could change the fund manager, but they probably won't. Genuine question - how many hours a week do they put in?

My guess is 12 Board Meetings a year, probably starting at 11, followed by lunch at 1, plus attending some committee meetings with a similar timetable. Let's say 50 hours actually meeting. There may be some extra work outside the meetings, and there may be other events calling for discussions in extraordinary meetings.

You can make your own decisions. I should add that the people involved in the company limited by guarantee received no remuneration.

TJH

[Lootman]

What do the directors of ITs do to earn their money? Is it money for old rope?

Since ITs are structured as companies then the role of directors is similar to their role in an other company. Sort of an honorary part-time position.

I worry more about the equivalent role in open-ended funds, typically called trustees or some such. I have seen first hand them being very close to the
fund manager, accepting generosity, whilst all the time ostensibly being on the side of the investors.

I saw a few things I did not like during my 7 years in fund management in the 1990s, and some of it I am still not allowed to talk about even after all this time.

[scotia]

There are pros and cons to both.

As I understand things, OEICs are simpler. You give them your money, they go buy stock in the stated proportions, allocate you units of the OEIC and that's about it. Fairly simple and elegant. However, given the mechanism of buying and selling, it means that if a OEIC has exposure to PE or illiquid assets, it means that should client redemptions happen at a rate higher than expected, the fund may block investors from withdrawing cash as it's dependent on the sale of unlisted assets. Think Neil Woodford scandal.

I believe that OEICS are only permitted to invest a maximum of 10 per cent of their assets under management in unlisted securities and there is no such restriction on ITs.
Those in the Woodford OEIC got most of their money back , while those in the Woodford IT lost most of their money
Generally speaking OEICs are safer than ITs. However property investments are not suited to OEICs, since selling off such investments may take a long time.

[Myfyr]

IT tend to have capped platform fees eg Hargreaves / A J Bell. Any cap for OEICS are significantly higher.

[stacker512]

IT tend to have capped platform fees eg Hargreaves / A J Bell. Any cap for OEICS are significantly higher.

Yes, and the crossover-point between the 2 is surprisingly low.

The "Platform charges v35.xsls" spreadsheet defines the crossover point at about £45,000 total portfolio value, at which point it is £200 pa custody charges for IT and shares on HL, versus £202 pa for funds/OEIC/UTs on the same platform.

[midgesgalore]

IT tend to have capped platform fees eg Hargreaves / A J Bell. Any cap for OEICS are significantly higher.

Yes, and the crossover-point between the 2 is surprisingly low.

The "Platform charges v35.xsls" spreadsheet defines the crossover point at about £45,000 total portfolio value, at which point it is £200 pa custody charges for IT and shares on HL, versus £202 pa for funds/OEIC/UTs on the same platform.

You must be looking at the SIPP platform fees cap of £200.
The fee cap is £45 in an ISA at Hargreaves Lansdown

midgesgalore

[AndrewInDevon]

The AIC have just updated their platform fee comparison heat map...

https://www.theaic.co.uk/aic/news/press-releases/aic-updates-platform-comparison-tables-to-help-investment-trust-investors