Why would anyone buy a unit trust?

westy22

Glen_Clark wrote: »

CLDN is on 20% discount, despite rising 7% since I bought it 3 months ago.
Financial company accounts are so opaque few people understand them, I certainly don't, lets be honest about it. Even the CEO of RSA missed a £300m black hole in his own accounts.
But I have done well out of investment trusts using a formula so simple that even I can understand it - only buy those on a big discount.:)

I have often considered CLDN and know it has a good record but I have always been put off by the fact that it is a 'family' run trust and some of its financial dealings and holdings are rather opaque. I suppose that is why it has such a high discount but I must say it has performed quite well in the last couple of years or so.

grizzly1911

Glen_Clark wrote: »

CLDN is on 20% discount, despite rising 7% since I bought it 3 months ago.
Financial company accounts are so opaque few people understand them, I certainly don't, lets be honest about it. Even the CEO of RSA missed a £300m black hole in his own accounts.
But I have done well out of investment trusts using a formula so simple that even I can understand it - only buy those on a big discount.:)

Why does CLDN spike so much?

westy22

grizzly1911 wrote: »

Why does CLDN spike so much?

I suspect it is the unlisted private equity elements that cause so much volatility in the fund. Also there are not that many daily trades and so there can be a significant difference at market close depending on whether the last trade was a 'sell' or a 'buy'.

Rollinghome

We often hear IFAs claiming that they didn't recommend ITs because they weren't authorised but without pointing out that it was entirely their choice not to obtain authorisation because, as ITs did not pay them sales commission, there was little incentive to do so. Advisers working on a fee basis rather than commission would normally have obtained full authorisation.

Thankfully, since RDR we are in a new era when IFAs are required to obtain their fees from clients for giving advice rather than being paid by fund managers to sell their products. Already there has been a significant rise in recommendations for investments that hadn't paid sales commission such as ITs and index trackers. Despite some glitches it bodes well for clients who need genuinely independent advice. The FCA have made clear they'll make further changes if needed.

The next milestone is when the DIY platforms are finally forced to end the prevarication and implement RDR2 in April.

Glen_Clark

westy22 wrote: »

I have often considered CLDN and know it has a good record but I have always been put off by the fact that it is a 'family' run trust and some of its financial dealings and holdings are rather opaque. I suppose that is why it has such a high discount but I must say it has performed quite well in the last couple of years or so.

One aristocratic family has a very big holding but that can be an advantage in that at least someone has enough skin in the game to make the effort of holding the management to account. People as wealthy as them are extremely unlikely to run off with your money because they have plenty of their own, and they have too much to lose from doing anything illegal. What can be worse is when there are so many small shareholders nobody has enough incentive to hold the management to account - they just sell their comparatively small shareholding if they don't like what the management are doing. That invariably leads to management taking huge risks running the company for short term profit at the expense of long term stability so they can claim huge bonuses for themselves.
In any case, there is always something to dislike or worry about. The point is that in this case its reflected in the price - 20% discount

Drp8713

Glen_Clark wrote: »

CLDN is on 20% discount, despite rising 7% since I bought it 3 months ago.
Financial company accounts are so opaque few people understand them, I certainly don't, lets be honest about it. Even the CEO of RSA missed a £300m black hole in his own accounts.
But I have done well out of investment trusts using a formula so simple that even I can understand it - only buy those on a big discount.:)

I may be reading the factsheet wrong, but is the 20% discount not due to the fact they have performed 50% worse than their benchmark over the last 5 years?

Obviously they could pick up over the next 5 years, but isnt it a gamble to buy in for a possible 20% gain to match the NAV but losing 50% of growth as those assets are underperforming their sectors?

Glen_Clark

Drp8713 wrote: »

I may be reading the factsheet wrong, but is the 20% discount not due to the fact they have performed 50% worse than their benchmark over the last 5 years?

Obviously they could pick up over the next 5 years, but isnt it a gamble to buy in for a possible 20% gain to match the NAV but losing 50% of growth as those assets are underperforming their sectors?

Last years dog is often next years star performer. But you never know.

Drp8713

What do you think of Foreign & Colonial IT?


Its diversified including a bit of private equity, has beaten its benchmark consistently, an average of 20% returns per year over the last five and is at a 10% discount to its NAV?


It seems like it has the advantage of a discount to NAV but without being out of favour/performing badly?

Glen_Clark

Drp8713 wrote: »

What do you think of Foreign & Colonial IT?


Its diversified including a bit of private equity, has beaten its benchmark consistently, an average of 20% returns per year over the last five and is at a 10% discount to its NAV?


It seems like it has the advantage of a discount to NAV but without being out of favour/performing badly?

I hold that one FRCL (currently up 5% since I sold and re bought it in April to use up my CGT allowance)
I re bought because they stopped paying the administration costs of the private investor scheme out of the fund, which should help performance a little.