Why discounts should be seen as a buying opportunity for investors

investment trusts

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While discounts on an investment trust can often attract hedge funds and arbitrageurs looking to force a trust to wind up, they also provide an opportunity for investors to purchase assets on the cheap

Often, one person's problem is another person's opportunity. For example, Alex Ferguson's problem in plugging the gaps in his team's defence last season was an opportunity for other teams to score lots of goals against Manchester United. And so it is that the perceived problem of discounts on investment trusts is actually often a tremendous opportunity. It goes without saying that, for investment trust managers fearful of losing mandates to run their funds, discounts are a major problem. A large and persistent discount usually attracts hedge funds and arbitrageurs looking to force actio...

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