The art of treading carefully

investment trusts

Discount control mechanisms have helped to maintain price stability, but many of these have not been tested in a bear market and should not be relied upon until they have been proven to work

A few years ago, those who sought to control investment trust discounts were resisting an inevitable tide with little except force of will. The combination of a savage bear market and the split-cap scandal left the sector in tatters, leading to discounts of biblical proportions. This desperate situation now seems a long time ago. As we approach the third year of rising equity markets, investment trusts have been almost entirely rehabilitated. As a result, many leading trusts now trade at a premium to their net asset value (NAV). There are undoubtedly reasons why some trusts are deservin...