Capital Gearing Trust - waiting for the starting gun?

aroominyork

MarcoM said:

this crap is at -6% on my portfolio

Wanna swap?

aroominyork

Hoenir said:

talexuser said:

Price up 2.23% today.

Be interesting to see if the inhouse broker mopped up any quantity of shares today following the restriction being lifted. . 

Do you mean did CGT buy back shares? What else would have made the price rise >2% today? "The Company has bought 294,910 of its own Ordinary shares of 25p today at an average price of 4,634.53 pence per share to be held in Treasury."

Hoenir

talexuser said:

Do share buy backs ever work? For a company it seems wasted compared to investment for future growth and future  dividends, and if you narrow the discount with no fundamental improvement in performance or prospects it might just convince more people to sell? Maybe good for management and their bonuses but for anyone long term else?

With liquidity being drained from the markets and bonds providing investors with alternative investment options.  Perhaps reducing the AUM is no bad thing. In order to become nimble again and be able to take advantage of future opportunties. Particularly as CGAM recently launched a bespoke UK Index Linked Bond Fund to add to it's stable. 

Hoenir

MarcoM said:

this crap is at -6% on my portfolio

Only you know why you bought it at the time. 

Linton

MarcoM said:

this crap is at -6% on my portfolio

What is your investment timeframe? For most  investments one would be happy to experience such a small fall as 6% during a difficult small number of years. 

Linton

talexuser said:

Do share buy backs ever work? For a company it seems wasted compared to investment for future growth and future  dividends, and if you narrow the discount with no fundamental improvement in performance or prospects it might just convince more people to sell? Maybe good for management and their bonuses but for anyone long term else?

It rather depends on what you mean by “work”. For WP funds the objective is to reduce medium term volatility rather than maximising long term gains. Reducing the premium/discount range is part of doing that. If your objectives don’t match those of a particular fund why choose to invest in it?

Hoenir

Linton said:

talexuser said:

Do share buy backs ever work? For a company it seems wasted compared to investment for future growth and future  dividends, and if you narrow the discount with no fundamental improvement in performance or prospects it might just convince more people to sell? Maybe good for management and their bonuses but for anyone long term else?

It rather depends on what you mean by “work”. For WP funds the objective is to reduce medium term volatility rather than maximising long term gains. Reducing the premium/discount range is part of doing that. If your objectives don’t match those of a particular fund why choose to invest in it?

CGT operate a discount policy in order to ensure that there's liquidity in the company's shares. The purchased shares being held in Treasury and not cancelled. This ensures that all shareholders are treated equitably and won't suffer a sudden widening discount/ price spread. (Which would be most unwelcome if they needed to sell). The Discount Control Mechanism means that the company itself operates as a market maker. Reselling into the market when the share price moves above what was paid to acquire them. A further net gain for shareholders. 

talexuser

Linton said:

 If your objectives don’t match those of a particular fund why choose to invest in it?

Perhaps you chose to invest some time ago when it seemed to fulfil its remit to maintain capital with low volatility, but the fund then failed due to some bad choices that comparable funds did not suffer. No one chooses to invest in a bad fund - it remains to be seen if CGT can pull back to a long term comparable performance to its peers. I sold out of the ISA about a year ago, the unwrapped had to wait because it is not worth paying CGT if I don't need the money now and it is only a small part overall.

tigerspill

Can I ask if some could explain this discount policy or mechanism in simple terms?  How it works and how it affects investors? Thanks