“This makes them a lot more like an open-ended fund and it is not something that an investment company can really do unless it holds investments that can quickly be turned into cash. These policies are used to give investors confidence of being able to trade in and out of a trust at close to NAV.”
He points out the Martin Currie Global Portfolio (MNP) was one of the first trusts to adopt a zero-discount policy, which has been in place since launch in July 2013.
“During the past 12 months, MNP has traded at an average discount of 0.5 per cent (median discount 0.6 per cent).
“Seven months ago, multi-asset trust Seneca Income & Growth Trust (SIGT) introduced a new discount control mechanism which has been successful in keeping it trading close to a zero discount as intended. Since the introduction of the new mechanism, SIGT has traded at an average discount of 0.10 per cent (median discount 0.15 per cent).”
Buy and learn
But Mr Burns feels many advisers are still not dipping their toes into the investment trust pond.
“I think quite often some of them use the discounts and the gearing as an excuse to say they’ve thought about it but it’s too risky for their clients,” he suggests.
"Like many things, advisers don’t get comfortable with it unless they’ve actually had a go.
“In a way, there’s an educational element but people just have to get on with it and if they know there’s a very good manager in the investment company space they like they should just [buy] it and learn that way, I think.”
eleanor.duncan@ft.com
