What investment trusts are you currently buying?

green_man

I don't let a premium put me off unless the trust has a long term history of trading at a discount but is currently at a premium.

My trusts are primarily focused around providing an income (targeting 4% +) without too much uk exposure (as my pension is heavy on uk exposure)

Have recently bought:
SCAM
BRWM
AAIF
ALAI
MYI

green_man

Rollinghome wrote: »

There seems a very large number of trusts in that pf and presumably a vast number of underlying shares. Was that the intention or just how it happened? Being lazy, I'd find it near impossible to keep tabs on that many ITs and try to have quite large sums in a far smaller number.
.

Yeh I agree, I am targeting about 12-15 including some funds/bonds.

JohnRo

Rollinghome wrote: »

There seems a very large number of trusts in that pf and presumably a vast number of underlying shares. Was that the intention or just how it happened? Being lazy, I'd find it near impossible to keep tabs on that many ITs and try to have quite large sums in a far smaller number.

I've questioned it myself. The reason for so many is that I've chosen to hold three trusts in seven of the categories, where one in each would suffice, with a view to mitigating some of the individual management risks and hopefully capturing some added value along the way as they fluctuate over time. The effect of holding this many is cost neutral and the spreadsheet I've set up does all the hard work and decision making for me now it's set up.

The overriding theme in this portfolio is income, so a market downturn should be of benefit longer term. I'm not interested in market timing or constant chopping and changing, it's about rebalancing and compound income generation.

I took the view with this choice that we're probably entering a lower growth future given the QE induced gains in recent years and how that might unwind. It's a judgement call though and accept I may regret it.

bowlhead99

Freecall wrote: »

Thanks bowlhead99, I am sure that much of what you say is correct but I would like to offer a slightly different explanation.

Now, the institutions will have little or no interest in trading IT’s, after all that is not what they are intended for. They will buy stocks, bonds, derivatives etc directly in the primary market. This is a very efficient market place where the tiniest movement in perceived value is reflected in the price.

On the other hand, individual investors wishing to buy into baskets of assets which are selected by a manager to fulfil the stated objectives of the collective investment might buy IT stock. This is not such a liquid market, not because shares in IT’s cannot be readily sold but because by their very nature, individual investors have a high degree of market inertia. People often hold the same investment for years on end.

We therefore have a single marketplace divided into two parts. One is quick reacting and efficient, the other relatively slow moving and somewhat inefficient. There is therefore a degree of decoupling between the two and that is what we see in the form of premiums/discounts.

I agree with that explanation, in that the target investors of an IT are generally a distinct type of market participant - these investment vehicles were created for retail investors, or entities at the smaller end of the scale, rather than institutional investors - whereas the wider underlying market of all listed companies that could be held directly, are generally institutional.

The institutions don't necessarily want to buy and hold a basket of what someone else has picked for them - if they want a pre-packaged managed portfolio they will want to engage their own managers on their own terms, and if they do want a similar "basket" they will potentially want to buy a bigger basket than what's offered by a £200m investment trust.

So, an element of the pricing anomalies is because it is different groups of people setting the prices.

That doesn't necessarily mean that a discount of trust price versus asset price or vice versa is necessarily a screaming bargain that nobody has gotten around to arbitraging away because there's nobody monitoring or participating in both pools at once - because of course, there are people doing that. It is always worth considering *why* the market is happy with the trust being on a particular level of discount or premium, before you choose to pay the price or walk away.

In some asset classes such as private equity or venture capital, there are pretty much permanent discounts, because of the inherent iliquidity of the underlying assets. The quarterly NAV valuation might be "fair value" in line with the accounting standards but it will always be out of date, subjective, and impossible to realise at short notice if the investors wanted the trust to wind up. The value can only be realised by someone who is willing to hold a long time.

Similarly in other cases such as higher yielding infrastructure-focused or property-focused trusts it's easy to see why they are on a premium in the current markets, if it's the casual investor's only practical way of buying into the asset class. So as one of those casual investors, it doesn't imply you shouldn't pay the premium if you like the look of the risks relative to other things.

Thrugelmir

Freecall wrote: »

Of course it is always nice to buy at a discount but if one is going to try and engineer such things then we get on to the issue of trying to time the market which is a whole subject in itself.

Just to add that I don't simply trade IT's depending on their discount/premium. The underlying investments held form a key part of my personal trading decisions. On the whole I buy and hold.

Shmo

I've been selling down my individual utility shares (mostly UU. ansd SVT) and buying ECWO and PEW. I was mainly holding them for the dividends anyway and those trusts were yielding around 6%. Have UEM in the watch list but yield probably wasn't high enough to tempt me.

Noticed the lack of liquidity when buying PEW. Had to buy in small chunks as the quotes i was getting were crazy. 2500 @ 131p or 5000 @ 140p. Never mind, I'll come back later for the rest.

Also added to CYN which I bought in to way too early when it was mentioned on John Baron's website. i miss that site but I'm too miserly to pay to view it.

Thrugelmir

I hold ECWO. Been monitoring the dividend cover. As has drifted down over the past few years. Less than 1x currently.

racing_blue

green_man wrote: »

Have recently bought:
SCAM

Ha, that must have taken some cojones

Pincher

It's easy to trade individual instruments in the UK, but there are just too many countries, time zones, currency control regimes etc. What "institution" is going to have an all-singing all-dancing trading team that has access to all the markets?


Far easier to buy units in a fund that already has a license to trade in Shanghai/Shenzhen/Hong Kong than to do it yourself to get exposure to China.

Dird

green_man wrote: »

Have recently bought:
SCAM

Don't say they didn't warn you