What is a common reason for investors to utilize investment trusts?

Investors often utilize investment trusts primarily for the diversification of holdings. Investment trusts pool capital from multiple investors to invest in a diversified portfolio of assets, which may include equities, bonds, or other securities. This pooling allows individual investors to gain exposure to a wider array of investments than they could typically achieve on their own, effectively spreading out risk.

By investing in a single investment trust, investors benefit from the collective investment strategy, reducing the impact of poor performance from any single asset. This diversification is particularly beneficial in mitigating systemic risk and enhancing potential returns over time.

While tax benefits and access to private equity can be relevant aspects of certain investment vehicles, they are not as universally applicable as diversification. Investment trusts are also subject to regulation, and claiming a lack of regulation would not accurately reflect the standards and oversight that govern these investment vehicles.