The impact of DCMs on investment trusts

ON TRUSTS

There has been a perfect calm in the investment companies sector over the last year or so. After 11 consecutive months of rising equity markets the sector is in fine fettle, with the average trust (size weighted) boasting a one-year net asset value (NAV) total return of 33% at the time of writing.

Performance has been enhanced by a modicum of gearing, at around 8%, and an increasing appetite for underlying investments that are deemed to be higher risk; the sort of investments that are more likely to feature in an investment trust manager’s portfolio, given their ability to take a longer-term view. Share prices have fared even better on average, because rising markets typically encourage discounts to narrow as confidence grows. Over the last 12 months the average discount has narrowed from 9.3% to 5.8% and according to the Association of Investment Companies (AIC) there are now ...