Best and worst: Funds find a premium in recovery shares: UK General Investment Trusts

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The Independent Online
M&G launched its Recovery investment trust shortly before the general election in April last year and raised pounds 126m. Most of the money was invested in package units of shares - through personal equity plans - although the trust also has income, capital and zero- dividend preference shares.

Richard Hughes, the fund manager, said he invested the money gradually over the summer of 1992, buying shares cheaply when they were depressed, between the election and 'Black Wednesday' on 16 September. So the recovery oriented portfolio was well placed to take off when the stock market picked up.

Among the best performing shares were those of Asda, British Steel, Storehouse, National Westminster Bank and Royal Insurance.

The performance of the package units, and some of the other classes of shares, has fallen back recently.

The package units had risen in price to a premium over their asset value, at one point trading at pounds 1.50 each against a net asset value of pounds 1.30 a share.

Mr Hughes said that the price had got off to a good start in October, however, and since recovery stocks usually performed well for three or four years after a recession he expected another two years of good returns from the fund.

Fleming Claverhouse has also seen its share price move to a premium, and the managers organised an issue of new shares earlier this year to soak up demand.

These shares were invested in a new portfolio which mirrored that of the existing fund. This was done to avoid any dilution of the existing investors' holdings.

Tony Nutt, the fund manager, said the issue had probably affected the share price, but he defended the move. If the fund had not enlarged its capital and the share price had gone to an ever-bigger premium, he said, there was a danger that investors would eventually have taken fright and sent the price sharply downwards.

The fund invests mainly in larger companies and has a portfolio quite different from M&G's Recovery, so a direct comparison is misleading.

Finsbury Asset Management has been in the spotlight recently because of its plan to launch an investment trust that will allow investors to participate in the Lloyd's insurance market. Their money will underwrite risk in the market - although not with unlimited liability. Meanwhile, it will be held in a portfolio of shares that will mirror that of the Finsbury Growth Trust, according to Malcolm King, the manager of both this fund and of the Finsbury Trust.

Finsbury Growth Trust invests mainly in larger companies, with 20 per cent of its shares held by the Finsbury Trust. The latter has done well with its holdings in property companies, which include British Land.

----------------------------------------------------------------- UK GENERAL INVESTMENT TRUSTS ----------------------------------------------------------------- The best pounds 1 Finsbury Trust 181.36 2 Govett Strategic 167.48 3 Finsbury Growth 153.42 4 M&G Recovery Package Units 149.11 5 Keystone 149.03 The worst 7 Practical Investments 140.45 8 Albany 138.37 9 Whitbread 134.18 10 Malvern UK Index 131.33 11 Fleming Claverhouse 125.24 ----------------------------------------------------------------- The table shows the change in the value of pounds 100 invested over one year to 1 October, 1993, the shares valued on a mid-market price basis with net income reinvested. ----------------------------------------------------------------- Source: Micropal -----------------------------------------------------------------

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