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.
Diving in at the deep end is no excuse for shirking the style stakes
- 2 Loom bands: Bids for dress made from colourful rubber reach almost £154,000 on eBay
- 3 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 4 Why I'm on the brink of burning my Israeli passport
- 5 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...
Day In a Page
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
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square