A drawback with Investment Trusts

ffacoffipawb

cloud_dog said:

Struggled with Fidelity to get a FCIT quote but, got one eventually. 

Buy or sell? I suspect the latter would have been harder.

cloud_dog

Nope, this was to buy.

It could have been a technical hitch but I don't believe so, was able to get a quote to buy MNKS ok.

Sue58

I bought MNKS and BNKR with Fidelity today with no problems.

Thrugelmir

cloud_dog said:

Struggled with Fidelity to get a FCIT quote but, got one eventually. 

Valuation of private equity holdings would concern me at the current time. 

bowlhead99

Thrugelmir said:

cloud_dog said:

Struggled with Fidelity to get a FCIT quote but, got one eventually. 

Valuation of private equity holdings would concern me at the current time. 

Mentioned  in relation to FCIT on another thread a couple of weeks ago where poster thought ,"trading at a small premium but the share price has moved down over the past few days so I think it could be a suitable time to invest".  The share price ended that day over £7 and is about 20% lower than that now, ten business days later.
https://forums.moneysavingexpert.com/discussion/comment/76883629#Comment_76883629

The NAV (last reported for Wednesday close of business 632p against share price at that time 621p) will have a somewhat stale valuation for the PE holdings so you may be buying at a premium to the eventual March valuation rather than at a discount.

Still, even if the PE holdings do not get valued very frequently, the private equity strategy was only <10% of the overall portfolio in the last published half-year report (December report is due shortly). The rest of the NAV will be more 'live'.

I've sold down a number of listed PE fund holdings in recent weeks as although they are useful to hold for the long term they don't have a magic immunity to market downturns - they can just (fortunately, as a seller) take a while to react. Some of my holdings had benefited from a good combination of discount narrowing and underlying NAV growth over the last decade and I will add again in due course.

Thrugelmir

bowlhead99 said:

Thrugelmir said:

cloud_dog said:

Struggled with Fidelity to get a FCIT quote but, got one eventually. 

Valuation of private equity holdings would concern me at the current time. 

Still, even if the PE holdings do not get valued very frequently, the private equity strategy was only <10% of the overall portfolio in the last published half-year report (December report is due shortly). The rest of the NAV will be more 'live'.

That's a much smaller % than when I held the stock. Though I bought in when the discount was over 15%+ and the trust had no buyback policy. Having personal experience of the valuation of private equity investments over the years. I'm a little wary in times of extreme market volatility. 

cloud_dog

I have cash on the side and was dipping my toe.  I will continue to dip my toe, as and when.

bowlhead99

Thrugelmir said:

bowlhead99 said:

Thrugelmir said:

cloud_dog said:

Struggled with Fidelity to get a FCIT quote but, got one eventually. 

Valuation of private equity holdings would concern me at the current time. 

Still, even if the PE holdings do not get valued very frequently, the private equity strategy was only <10% of the overall portfolio in the last published half-year report (December report is due shortly). The rest of the NAV will be more 'live'.

That's a much smaller % than when I held the stock. Though I bought in when the discount was over 15%+ and the trust had no buyback policy. Having personal experience of the valuation of private equity investments over the years. I'm a little wary in times of extreme market volatility. 

The F&C IT back in the day did hold quite a bit more private equity. The F&C Ventures team spun off in the early '00s to become Graphite, and the fund continued to co-invest a lot with Graphite Enterprise Trust; the latter became ICG Enterprise trust when ICG bought Graphite (a couple of years after BMO bought F&C).  Private equity is more of a 'curiosity' within the portfolio now, rather than a key driver of returns - indeed it was a negative contributor in the last financial statements, but that's really just a function of markets and cherry-picked date ranges rather than a fundamental bad thing.

While the trust will say it has a 150 year history, changes to the fund manager over the years can bring stark changes to portfolio composition in the longer term - it's a bit like your frequent comment that the FTSE100 now is  really not the same as the FTSE of 1999 or 1987, even though it's still the FTSE.

Having been involved in more than my fair share of PE valuation discussions they are certainly not an exact science, though participants in the process generally do have a more robust approach than 'back in the day' - when it was de rigeur to hold the value down for as long as possible to give the investors a nice surprise rather than a disappointment on sale, but also try to avoid too much bad news by not impairing an asset until it was definitely dead, to help the carried interest.

Audaxer

NedS said:

Once the cash is all invested, I will have no choice but to strap in for the ride if things drop further taking solace from the dividends along the way. 

I'm just hoping that there is little effect on IT dividends, in particular that the long established equity income ITs keep paying increasing levels of dividends like they have done for decades.  

MK62

Audaxer said:

NedS said:uhh

Once the cash is all invested, I will have no choice but to strap in for the ride if things drop further taking solace from the dividends along the way. 

I'm just hoping that there is little effect on IT dividends, in particular that the long established equity income ITs keep paying increasing levels of dividends like they have done for decades.  

Depends on the length and depth of the disruption to the IT's underlying companies, the level of the IT's reserves and the extent of the manager's willingness to use them to support the dividend. Personally, I wouldn't bank on the dividend levels even being maintained beyond one of two quarters if this crisis persists, let alone being increased.......but only time will tell.