As discounts rose to 40 per cent, you did not want to be in investment

I HAVE a soft spot for investment trusts. In the 1960s I worked for a very progressive stockbrokers, now part of the mighty Dresdner Bank. They devised what must have been one of the earliest portfolio management services for small clients, using investment trusts' shares.

In the early 1970s I was put in charge of running it. This was a time when discounts rose from 10 per cent to 40 per cent. You did not want to be in the investment business then - as investor or manager.

Investment trusts are different from unit trusts because the price at which shares change hands is determined by the market rather than just by the value of underlying assets.

Investment trust shares can stand at a discount - or a premium - to the worth of the underlying portfolio. Discounts are more common. When a discount widens by 30 per cent, it is like having a third wiped off the value of your shareholding.

Much water has flowed under the bridge and investment trusts have regained some, but not all, of their poise. Unit trusts have become the UK's favourite retail collective investment. Behind the rehabilitation of investment trusts has been the shaking up of investment management houses, a more focused approach by investment trust companies, the introduction of innovative capital structures and the setting of final redemption dates for many trusts.

But discounts did widen again in the 1990s - at least until the beginning of this year. Since then trust companies have been boosted by both the changes that have allowed them to repurchase their own shares and a multi- million pound advertising campaign to be launched this autumn.

You can use investment trusts to provide specialist exposure to a market, such as North America, or simply to give general investment coverage. Take Alliance Trust as an example. One of the largest trusts (it is worth close to pounds 2bn), it has also one of the lowest management charges and offers attractive savings schemes for those with limited resources. It will never be the best-performing trust - it is too broadly spread - but history shows that it has delivered consistent performance.

I mentioned smaller company trusts last week. Here you have to be a little more careful. We rather favour Fleming Mercantile. It can actually invest in medium-sized companies too - probably no bad thing, given liquidity problems at the smaller end of the market.

Indeed, it has suffered from overweighting smaller companies, although this will have done it no harm this year.

Industry themes are gaining popularity. Henderson Technology is run by Brian Ashford Russell, an experienced and cautious investor. There is more interest in this market and much potential. These are not the cheapest in terms of discount, although Alliance does offer the opportunity of buying shares at 13 per cent less than asset value, while Fleming Mercantile has a near 20 per cent discount. But Henderson Technology stands at a mere 3 per cent below its notional break-up value.

Brian Tora is chairman of the Greig Middleton investment strategy committee

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?