Investment trusts

bigadaj

Looking through trustnet I was surprised to see how many are still on moderate to large discounts. All the infrastructure trusts are on premiums, but there seem many good income and growth trusts trading below value.

This can of course be a reflection of poor management or could be mis pricing the actual value of illiquid assets. With so little value elsewhere I'm tempted by them, though they are potentially becoming expensive in terms of management costs with open ended funds becoming less costly. There's potential for illiquidity though I wouldn't have thought I'd want to cash them in anytime soon.

I think someone mentioned one or more trusts that also only grew by capital appreciation, and no dividend so avoiding the need for declaration for higher rate tax and I need to check on this also.

Some of the property funds are listed as being incredibly cheap but seem to be Southern European markets with no buyers for their assets presumably.

thelawnet

Any examples?

Totton

It might be an idea to look at the historical discounts of those IT's that appear to be on a healthy discount. You can get the discount trend from the AIC website and also I think Morningstar show it. So for example, Caldeonia is on a discount of 21.32% but was at 29.71 just over a year ago. Plenty of other examples, well worth checking that historical trend before taking the plunge.

http://www.theaic.co.uk/companydata/B11BB/performance

Glen_Clark

bigadaj wrote: »

expensive in terms of management costs

with total charges still far from transparent, particularly when they are a fund of funds.
Apparently some also charge separately for things like 'research' and this is not included in the quoted charges.

thelawnet

Yes that was my thinking too.

Things that have traded on discounts forever and are now merely on a narrower discount do not scream value.

What you want to look at is trusts or sectors with wider than usual discounts. The market usually turns out to be more efficient than it first appears, in that the wider discounts appear on the worst performers in a given sector.

bigadaj

Totton wrote: »

It might be an idea to look at the historical discounts of those IT's that appear to be on a healthy discount. You can get the discount trend from the AIC website and also I think Morningstar show it. So for example, Caldeonia is on a discount of 21.32% but was at 29.71 just over a year ago. Plenty of other examples, well worth checking that historical trend before taking the plunge.

http://www.theaic.co.uk/companydata/B11BB/performance

Caledonian seems like a reasonable example, the point about historical perspective is valid and worth consideration, but the growth in dividends of this and other trusts over the longer term is worthy of consideration, being mindful of gearing of course.