View from City Road: Success of trusting in others

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The Independent Online
The runaway success of the Mercury World Mining Trust launch was a nice birthday present for Julian Baring, the fund's flamboyant manager, who was 58 yesterday. It also signified the rehabilitation of that curious nineteenth century animal, the investment trust.

After a gloomy period of institutional disinterest, large discounts to net asset value and frequent hostile takeovers in the mid-1980s, investment trust managers rediscovered their roots when they started marketing themselves to the public towards the end of the decade. A spate of high income and other specialist trusts drew interest and discounts started to narrow.

But in the last year or so they have remembered another advantage of trusts - and a reason for their appeal to institutions earlier this century. Investment trusts were used in areas where institutions felt they did not have in- house expertise. A series of emerging market trust launches have captured large sums of money from institutions that wanted exposure to this high growth area but did not feel qualified to invest.

Mr Baring's trust has raised pounds 425m - about pounds 380m of it from institutions - for a similar reason: institutions have decided they want to buy mining shares but do not know how to value them.

In case they do turn against these recently launched trusts, Mercury and others have learnt from the grim experiences of the 1980s. Many trusts have predetermined lifespans after which shareholders vote on whether they should continue. The Mercury World Mining Trust has a five- year lifespan. This should stop institutions finding themselves holders of trusts they no longer want.

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