Investment trusts special: What advisers need to know about gearing

One important feature that distinguishes investment companies from open-ended funds is their ability to gear, or borrow, in order to enhance their returns. The effect of gearing is to amplify performance, giving it a boost when asset prices are rising and magnifying losses when they are falling.  Gearing is an important feature, which has contributed to the sector's outperformance of open-ended funds over the long term, but it does increase the short-term volatility. When considering investment companies for your clients, you need to look at the gearing levels and information.  Gearin...