Bull market provides good climate for investment trusts

Specialist and small-cap investment trusts have made good returns over the past few years helped by discount control mechanisms, though investors should note that some of these have not been tested in adverse markets

We are now three years into a bull market and the UK FTSE All Share Index rose in value by over 65%, in the three years to 7 March 2006. It has been a good climate for investors and investment trusts have enjoyed a strong run during this period. Compared with unit trusts and Oeics, most investment trusts have an advantage when it comes to performance potential because they trade at a discount to their net asset value. Consequently, when equity markets are rising and demand for investment trusts increases, discounts will tend to narrow which can boost share price performance. During the thre...