Scottish Mortgage backs calls to scrap ‘bizarre’ EU rules on investment trusts that risk harming millions of British savers
One of the UK’s most popular investment trusts is backing calls to scrap ‘bizarre’ EU rules that risk harming millions of British savers.
FTSE 100-listed Scottish Mortgage said trusts were currently stuck in a bizarre situation where many of their costs are being double counted. This is because of the way in which EU rules are being interpreted by the City’s watchdog, the Financial Conduct Authority (FCA).
The UK is under no obligation to apply these regulations now it has left the bloc.
Scottish Mortgage is valued at £11.1billion. Small savers have piled in because its bets on US tech companies have delivered hefty long-term rewards, though its shares have fallen back from a high in 2021.
Its intervention follows comments from peers in the House of including former pensions minister Baroness Ros Altmann. She has warned that investment trusts are being starved of cash and have become vulnerable to foreign takeovers.
Harming savers: Many of the costs of trusts are being double counted because of the way EU rules are being interpreted by City watchdog the Financial Conduct Authority
Critics say there are flaws in the way the regulator insists the costs of investing must be calculated.
They argue these rules, which are not used by any other country, make it appear as though investing in British trusts is more expensive than it really is.
Altmann, backed by a cross-party group of MPs and peers, is currently pushing legislation that would scrap the rules through the Lords.
‘Nobody benefits from an unlevel playing field,’ said Stewart Heggie, commercial director at Scottish Mortgage Investment Trust.
He added: ‘A common sense approach is required to find a speedy solution and we support the proposals being made by, amongst others, Baroness Altmann.’
His comments were echoed by James Hart, investment director at the FTSE 250-listed Witan Investment Trust.
He warned that if the issue was not resolved ‘vital sectors’ of the UK economy could end up struggling for cash and ‘in the hands of foreign owners rather than our own savers.’
Hart said the investment trust sector had been serving ordinary people who want to invest in the stock market ‘for over 150 years and still offers one of the best structures to grow their wealth’.
‘It would be a real shame if lawmakers missed the opportunity to level the playing field and perhaps permanently damage a great British success story,’ he added.
Investment trusts have been a key part of the stock market for more than a century and make up around a third of the FTSE 250.
In the Victorian era, they were used to raise money to build railways and other projects around the world.
More than 360 trusts, with £267 billion of assets, are listed in London.
