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"Investment trusts trounce the competition" says FT

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"Umpteen academic studies make clear that over the long run active managers tend to fail to match their benchmark.

This makes the 2013 outperformance of one small and apparently outdated section of the fund management universe look all the more impressive. UK investment trusts have trounced their competition, and they have trounced their best-known benchmark indices, and they have done this over one, three, five and ten years – all the most popular time spans over which to judge funds."

Full article at http://www.ft.com/cms/s/0/cf1f4eb2-77b3-11e3-807e-00144feabdc0.html#ixzz2pnmNrnjT

Comments

  • SnowMan
    SnowMan Posts: 3,687 Forumite
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    https://www.google.co.uk/#q=%22investment+trusts+trounce+the+competition%22&tbm=nws

    (will probably only work if accessed via a desktop computer or device set to access via desktop mode)
    I came, I saw, I melted
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    This makes the 2013 outperformance of one small and apparently outdated section of the fund management universe look all the more impressive.

    Outdated? If anything, the buzz over ITs in recent years is starting to make them too popular, which is pushing many to premiums. At such times, I'd rather gain exposure to the underlying assets via a different route (tracker, ETF or even an active fund if you insist) and then switch back if/when a tempting discount comes along.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • Rollinghome
    Rollinghome Posts: 2,729 Forumite
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    edited 8 January 2014 at 2:59PM
    gadgetmind wrote: »
    Outdated? If anything, the buzz over ITs in recent years is starting to make them too popular, which is pushing many to premiums. At such times, I'd rather gain exposure to the underlying assets via a different route (tracker, ETF or even an active fund if you insist) and then switch back if/when a tempting discount comes along.
    Bull markets tend to squeeze discounts but it's a varying picture. If it's true that more IFAs are recommending ITs now that commission on UTs has been banned that may also have an effect.

    There are some fashion sectors moving to silly premiums as they always have but many others are just where they were when I bought them 30 odd years ago (and I've got some brown-tinged copies of the FT back then to prove it).

    Here's the 5 yr discount history for the good old, boring Foreign & Colonial IT:

    GetDiscountPremiumChart?width=650&height=250&unitCode=ITFRCL&span=60

    Trending upwards gently over recent years but still well below peaks 5 years ago and around the same point it's been for as long as I can remember. F&C have a discount stabilization policy but still plenty like it.

    Like you I'd be very wary of buying on a premium except for a very exceptional reason particularly at this point..
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    I broke my golden rule and bought TEM when there was little discount, because of the management's recent track record. Its the only IT I have so far ever lost money on. In future I will stick to only buying when the discount is at least 10% and around or above the long term average.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    I did very well from European ITs and Property ITs (and TR that's both!) coming out of the recent wobbles.

    I'm now looking closely at EM and Mining ITs.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Post of the Month
    edited 9 January 2014 at 1:47AM
    Glen_Clark wrote: »
    I broke my golden rule and bought TEM when there was little discount, because of the management's recent track record. Its the only IT I have so far ever lost money on. In future I will stick to only buying when the discount is at least 10% and around or above the long term average.

    Just out of curiosity; I remember you saying previously that you liked buying ITs at a discount because it allowed you to get ownership of (and income from) a larger amount of underlying assets, potentially with gearing too for enhanced returns. But clearly buying into a decent closed-ended fund at par or premium can also deliver market-beating returns without those nice-to-have advantages.

    Off the top of my head, TEM is equal or above (or thereabouts) where it was 18 months ago , though lower than Q1 last year, in line with many EM funds and trusts. It has not been a disaster over most timescales. Also, you don't seem like the kind of person who would sell out of a solid fund with decent long-term track record to crystallize a loss when there is still a reasonable investment case (TEM is at a discount again these days).

    So I'm wondering if,

    a) you've really "lost money on" the TEM holding or are merely showing a paper loss as it has declined from its all-time highs like many EM collective investment schemes in some recent periods, and/or;

    b) you are really going to refuse to buy any non-discount ITs in future on the basis that one reasonable quality fund lost its premium over a given timescale. This seems like cutting your nose off to spite your face, as there would be many many other timescales over which the price and/or value of TEM would have appreciated at a market-average beating rate which more than offsets a small loss of premium.

    The premium reflects prevailing market demand for the skills of a quality manager and strategy; this may wax and wane, but if you double NAV while losing some of that premium you can still be well above the return of, say, the MSCI EM index. In many cases waiting for a good IT to become available at a discount again could cost investors some seriously decent returns while watching the clock for that dream entry price.. So the opportunity cost of refusing to buy at par or above the long-term average, could be high, if you accept the argument that closed ended funds with great track records are a sensible way to access a particular market.
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    edited 9 January 2014 at 10:25AM
    bowlhead99 wrote: »
    Just out of curiosity; I remember you saying previously that you liked buying ITs at a discount because it allowed you to get ownership of (and income from) a larger amount of underlying assets, potentially with gearing too for enhanced returns. But clearly buying into a decent closed-ended fund at par or premium can also deliver market-beating returns without those nice-to-have advantages.

    Off the top of my head, TEM is equal or above (or thereabouts) where it was 18 months ago , though lower than Q1 last year, in line with many EM funds and trusts. It has not been a disaster over most timescales. Also, you don't seem like the kind of person who would sell out of a solid fund with decent long-term track record to crystallize a loss when there is still a reasonable investment case (TEM is at a discount again these days).

    So I'm wondering if,

    a) you've really "lost money on" the TEM holding or are merely showing a paper loss as it has declined from its all-time highs like many EM collective investment schemes in some recent periods, and/or;

    b) you are really going to refuse to buy any non-discount ITs in future on the basis that one reasonable quality fund lost its premium over a given timescale. This seems like cutting your nose off to spite your face, as there would be many many other timescales over which the price and/or value of TEM would have appreciated at a market-average beating rate which more than offsets a small loss of premium.

    The premium reflects prevailing market demand for the skills of a quality manager and strategy; this may wax and wane, but if you double NAV while losing some of that premium you can still be well above the return of, say, the MSCI EM index. In many cases waiting for a good IT to become available at a discount again could cost investors some seriously decent returns while watching the clock for that dream entry price.. So the opportunity cost of refusing to buy at par or above the long-term average, could be high, if you accept the argument that closed ended funds with great track records are a sensible way to access a particular market.
    Interesting post as always bowlhead, thanks. I can see that buying at a premium can still be good, but I still feel that buying at a discount gives you as better chance. (I bought TEM after reading a thread about it on here last year and still have it, so yes its a paper loss so far and I am intending to hang on to it for a few years. I generally only sell those that have risen strongly so as to use up my CGT allowance)
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
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