Using IT liquidity to your advantage

INVESTMENT TRUSTS

Simon Crinage, head of investment trusts at J.P. Morgan Asset Management, explains how liquidity within investment trusts can be used to benefit shareholders over the longer term.

Liquidity in investment trusts is important. Larger investors will want to ensure there is sufficient trading volume in the shares for them to move in and out without creating disruption, and smaller investors will want the reassurance that illiquidity will not push the shares out to a significant discount, or premium to net asset value. Liquidity may be low for positive reasons. For example, it is often lower in trusts that have longer-term shareholders, who do not tend to trade their holdings frequently, therefore short-term liquidity may not always need to be a priority. The invest...