What's wrong with making a fast buck
Saturday 04 April 1998
The argument centres on whether it is always beneficial for investors when so-called "arbitrageurs" buy up shares in their investment trusts in the hope of making a swift killing. This happens when the "discount" - the difference between a trust's share price and the value of its assets - narrows significantly.
At present, there is an average discount of 12 per cent between them, meaning you can buy pounds 1-worth of assets held by an investment trust for 88p. Arbitrageurs have been snaffling up investment trust shares and forcing them to "re-organise" - either wind themselves up and sell off the shares, or convert into unit trusts, or offer a cash opt-out to those who want to sell up and go.
David notes that in doing so, they can add value to a trust's shares and, by implication, benefit smaller investors. Moreover, canny investors who spot investment trusts where there is a huge (and recoverable) discount between the underlying asset value and the share price, could also gain.
All true. Except that what is not always considered is whether some of these changes are to the long-term benefit of investment trust shareholders. For example, if you convert to a unit trust you are likely to face higher annual management costs on your investment. If you opt to liquidate your shares, it may be at the expense of an immediate capital gains tax liability.
Almost by definition, arbitrageurs are typically in-and-out merchants, mostly interested in making a fast buck. Insofar as they have forced investment trusts to re-organise themselves for the benefit of all shareholders, well and good. However, smaller savers who are in for the longer-term may not always find themselves benefiting from their co-investors' money- making strategies.
A few weeks ago, I asked the Benefits Agency to tell me how much state pension I will get when I retire in a few decades' time. The actual result hardly matters (though it certainly won't be enough to pay for all my expensive habits). What interested me were the mechanics of the exercise, which even gives a breakdown of how much will be paid should I choose to stop work early. Fascinating and frightening stuff: it's enough to want to make you save hard.
You too can ask for a pension projection by calling the Retirement Pensions Forecast unit, on 0191-218 7585, and asking staff there to send you form BR19.
Should you feel retirement planning is worth investigation, The Independent is offering a free 26-page guide on the subject, sponsored by Eagle Star, a low- cost personal pension provider. The guide is, however, genuinely independent. You can ask for one by calling 0800 776666.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 2 Friends 20th anniversary: Alison Jackson photographs reunited cast
- 3 There is literally not a single woman in this iPhone 6 queue
- 4 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize