Investment Trusts

Published: 21/08/2018 By Martin Card

Here at tba Wealth we have always taken a keen interest in Investment Trusts as part of the investment universe. Unlike their unit trust or OEIC counterparts an Investment Trust has a price for which you purchase its shares and a value for the underlying assets of the trust – its net asset value.

Interestingly we are seeing that many Investment Trusts are trading at a premium to their net asset value – some as much as 50% above their net asset value. What does this mean? Well, it means that investors are prepared to pay 50% more than the value of the trust’s underlying investments for shares in that trust.

How can this be? This particular trust in question is Lindsell Train an investment trust that has a proven track record and of late has provided excellent investment returns of nearly 45% over the past 12 months. Buying shares at a 50% premium to the net asset value of the trust shows confidence in the investment managers going forwards but at what point will that confidence be tested? When is a share too expensive regardless of the past performance of that investment manager?

It is important to actively manage and assess your investment portfolio on a regular basis before emotional bias or perhaps greed take over. We recommend exposure to Investment Trusts all the time but only as part of a well diversified portfolio that is backed by excellent research teams who will make a judgement call on whether those Trusts have scope for further growth taking into account anticipated economic circumstances for the future.

Diversification and review are key features for managing investment risk.

Should you wish to learn more about Investment Trusts or discuss your investment portfolio please feel free to get in touch.