Dilemmas of balancing out growth and income stream

Several UK equity income investment trusts have been increasing gearing levels in the last few month...

Several UK equity income investment trusts have been increasing gearing levels in the last few months. In December Merchants Trust geared up by selling £30m of secured bonds. In the past six months the gearing on the City of London investment trust has been gradually increased from 7% to 10.5%. While both have similar investment remits in terms of providing a steady income stream the Dresdner-run Merchants vehicle has focused on undervalued businesses while City has built up exposure to the narrow range of growth stocks leading the market. Nigel Lanning, manager of Merchants, has already...