Should we fear investment trust liquidity issues?

INVESTMENT TRUSTS

Some commentators have questioned whether investment trusts will be able to deal with the increased fund flows many expect post-RDR. However, the debate about liquidity is more complex than is often portrayed, says David Barron, head of investment trusts at J.P. Morgan Asset Management

As the benefits of investment trusts become more widely known, there is a perception that they will find it difficult to satisfy a rise in demand for the limited number of shares they have in issue. The worry is that a lack of liquidity could cause delays when buying or selling shares and lead to higher discount volatility, lowering returns for investors. However, the issue of liquidity is very much dependent on an individual investment trust. The largest, best-performing trusts, that tend to attract the most attention from investors, should be able to cope with increased demand for thei...