J.P. Morgan: Fund supermarkets lagging on investment trusts

Fund supermarkets still face number of obstacles before rolling out their investment trust (IT) propositions, according to J.P. Morgan Asset Management.

A paper from the group - the largest UK provider of ITs - warned that while most wraps offer a wide variety of funds, supermarkets' offerings were still "patchy".

"Many popular investment platforms already offer a comprehensive selection of investment trusts as part of their service," the report said.

"However, some platforms still only offer a limited selection, or do not offer them at all - including the three biggest fund-based platforms: Skandia, Cofunds and Fidelity FundsNetwork.

"Systems constraints are an issue, with the specific dealing and custody requirements of investment trusts still proving a hurdle for some platform providers.

"Nevertheless, with demand for investment trusts growing, and with the RDR requiring advisers to select from across the retail funds market, the availability and visibility of closed-ended funds on platforms is set to continue to increase."

FundsNetwork became the first supermarket to reveal its IT plans, announcing it would launch ahead of RDR in November.

Cofunds is also understood to be readying a pre-RDR launch, while Skandia said it had seen limited demand for ITs on its platform.

James Saunders Watson, head of investment trusts marketing for J.P. Morgan, said the popularity of ITs would continue to grow as the RDR deadline approached.

However, the report also warned true parity would not be achieved until the Association of Investment Companies (AIC) and Investment Management Association used sector definitions that allow direct comparison of funds and trusts with similar objectives.

Head of investment trusts David Barron said the classification of investment trusts by their AIC sectors or objectives was "a welcome step forward."

"We were pleased that the FSA's finalised guidance stated very clearly that it believes it will be rare for a firm that uses a single platform for all its investment business to meet the standard for independence," he said.

"Although the availability of investment trusts on the ‘big three' fund supermarkets is still a little patchy, there are well over a dozen platforms where investment trusts are already accessible to advisers."