Trust babies trump stakeholder

As the first wave of Child Trust Fund beneficiaries head off for school, performance figures reveal that kids whose parents decided to invest their voucher in an investment trust-based plan are set to be the Warren Buffet's of the playground compared to play mates who were herded into Stakeholder plans.

"According to Government statistics, over 20% of CTFs opened have been in cash accounts and 70% in Stakeholder funds. Invariably these latter funds are invested in UK index trackers and most are charging a thumping fee of 1.5% per annum," explained Jason Hollands of F&C.

"Although F&C's own Stakeholder option, an All-Share Index Tracker, is lower cost than most and is currently delivering an attractive return for the first wave of CTF investors of around 37% so far, it is the investment trust options which have by far and away stolen the show," said Hollands.

F&C states that 2/3rds of the trusts now available in its CTF delivered a higher return than its Stakeholder option. The most popular choice, the core Foreign & Colonial Investment Trust, is up 53% while the more specialist top performers were Pacific Assets Trust (104%), F&C Private Equity Trust (84%) and European Assets Trust (82%).

"In addition to superior investment performance, in many case the charges on these trusts are substantially lower than Stakeholder funds and, importantly, greater diversification across markets is also available. Investment trusts are a good option for long-term children's savings plans," said Hollands.