Trusts' premiums at risk from rising interest rates

Investment trust analysts warn UK Growth & Income sector's 2.6% premium could vanish following inevitable hikes in UK interest rates

Leading investment trust analysts have warned the UK Growth & Income sector will drift out onto a wide discount when interest rates begin to rise. Analysts said the sector’s 2.6% premium to NAV is vulnerable to a correction when rates go up as investors move out of higher risk equity funds and into safer investments, such as savings accounts.  Oriel Securities’ Iain Scouller warned the sector could move back to trading on a 10% discount, which was last seen when interest rates hit 5% prior to the credit crunch. “If interest rates were to normalise there would be a flight out of ...