Investment trust

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An investment trust is a form of investment fund found mostly in the United Kingdom and Japan.^[1] Investment trusts are constituted as public limited companies and are therefore closed ended since the fund managers cannot redeem or create shares.^[2]

The first investment trust was the Foreign & Colonial Investment Trust, started in 1868 "to give the investor of moderate means the same advantages as the large capitalists in diminishing the risk by spreading the investment over a number of stocks".^[3]

In many respects, the investment trust was the progenitor of the investment company in the U.S.^[4]

The name is somewhat misleading, given that (according to law) an investment "trust" is not in fact a "trust" in the legal sense at all, but a separate legal person or a company. This matters for the fiduciary duties owed by the board of directors and the equitable ownership of the fund's assets.

In the United Kingdom, the term "investment trust" has a strict meaning under tax law. However, the term is more commonly used within the UK to include any closed-ended investment company, including venture capital trusts (VCTs). The Association of Investment Companies is the trade association representing investment trusts and VCTs.

In Japan, investment trusts are called trust accounts (信託口, shintaku-guchi); the largest stockholder of many public companies are usually trust banks handling the investment trusts, the largest being the Japan Trustee Services Bank, The Master Trust Bank of Japan and the Trust & Custody Services Bank.