"However, if you believe in business cycle analysis, we continue to remain relatively cautious from here. We expect a significant downturn. This would, with careful judgment, give us an opportunity to gear the [trust] and make back some of what we consider is only temporary depletion of capital.
"We will continue to stick to our sensible income credit selection strategy into a period of expected volatility."
Mick Gilligan, who runs the model portfolio service at Killick and Co, said: "{The trust} is the outlier in the AIC peer group. It may be that a dual mandate of preserving capital and generating high levels of income has proved too difficult. I concur. The board faces several options now. It can reset the investment objective, or it can look to materially enhance liquidity (something it is concerned about) by merging with one of the other Bond & Loan trusts. Judging by the need for scale and liquidity amongst the trust’s target market (private wealth), I suspect the latter would be better received by the market. Watch this space."
tara.o'connor@ft.com
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