Investors’ appetite for income in a dwindling market for dividends has prompted a surge in investment trust launches, with five new potential funds announced in recent weeks. After a quiet year so far for trust launches, with only one new trust floated in February, several were recently announced as fund managers seek to take advantage of low prices for stakes in smaller UK companies while investors are still willing to turn out their pockets for shares. Launches include the Schroder Business Opportunities trust, which is seeking £250m to invest in both public and private small and mid-cap UK companies, the Tellworth British Recovery & Growth which is raising £100m, and the Sanford DeLand UK Buffettology Smaller Companies trust. The Home Real Estate Investment Trust (REIT) is raising £250m to invest in accommodation for the homeless. As the pandemic has hit valuations of smaller UK companies, investors are looking to pick up good value. But they are mindful of the lessons from the collapse of Neil Woodford’s flagship fund and they are much more mindful of liquidity, and the risks that come with it. Investment trusts are publicly traded, closed-ended funds that trade at a discount or premium to the book value of their underlying assets. Trusts are popular with income investors for their ability to use cash reserves to smooth dividend pay-outs and provide a reliable income stream. Their closed-ended structure means they can hold illiquid assets and unlisted companies without fear of a sell-off. Income-starved retail investors turned to trusts in the wake of the pandemic sell-off, when a record number of UK companies announced cuts or cancellations of their dividends, and they continue to be among the top buys on retail investment platforms. The trust model is much loved by fund managers looking to invest without the risk of an investor sell-off if performance wanes and allows them more flexibility to invest in unlisted or illiquid companies.