Investment trusts stage a turnaround
UK listed investment trusts, which are popular with New Zealand investors wanting a tax-efficient vehicle for global share exposure, are staging a major revival.
Tuesday, March 14th 2000, 12:00AM
"A year ago, the investment trust industry was regarded as being on its last legs. The vultures were circling and radical action was required," London-based Association of Investment Trust Companies director general Daniel Godfrey says.
The trusts were in trouble as many institutions which were major shareholders were cashing up and investing directly into foreign markets.
As a result most of the trusts were trading at significant discounts to net asset backing, and there was significant volatility in these discounts.
To get retail investors to take up the shares institutions were selling the AITC launched a multi-million dollar, three year advertising campaign, which was funded by 172 trust companies.
In its first year the "its" campaign has spent £27.5 mill (NZ$88.7 mill) promoting investment trusts. In its second year the association is budgeting to spend £13.75 mill (NZ$44.4m mill).
Godfrey says this generic, industry-funded awareness campaign has been one of the main reasons for successful turnaround.
Many managers have increased their marketing activity around the "its" campaign and report increased numbers of investors.
The Foreign and Colonial Investment Trust says it has picked up an additional 5,000 shareholders its Private Investor Plan in year to December 31.
The other key reason why there has been a turnaround is that the boards that manage the trusts have used sharebuy backs to help stabilise and reduce discounts.
Godfrey says besides addressing the institutional/retail mix of shareholders in trusts the "its" campaign will help narrow discounts. The intention is that, over time, the average discount will be narrowed to 5 per cent and average discount volatility to +/- 5 per cent.
See earlier story on 'its"| « BT says it's TIME for a tech fund | Get your tax questions answered online » |
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