How to pick up some good investment trusts on the cheap

published 11 May 2016

160511-aviva — Pick up a few bargain investment trusts

Regular readers will know that I have a lot of sympathy with some active funds, and that I have a particular affection for investment trusts which have a history of low-cost outperformance.

They will also know that I don't think the evidence for passive over active should blind us to obvious opportunity.

Aviva, for reasons known only to itself (and presumably its very highly paid staff), appears to be selling out of its holdings of all investment trusts, something that is pushing their share prices down so that they are selling at attractive looking discounts to their net asset values (NAV).

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Aviva has sold out of its stakes in both Mercantile and Witan, pushing their discounts out to just over 10% and 6% respectively. It is also a top five shareholder in trusts such as the Scottish Investment Trust and Electra Private Equity (there is a full list on the AIC website).

What should you do? Think about buying some of the things Aviva is selling, says John Newlands, head of investment companies research at wealth manager Brewin Dolphin.

He is finding it hard to see "the long-term wisdom of dumping investment trust holdings, some of very considerable quality, at significant discounts". But their foolishness might be your chance to buy good funds cheaply: "Witan Investment Trust, for instance, offers sound long-term value at any sort of discount."

So buying it on a discount of 5%-6% now may be no bad thing. You'll be wondering what its total expense ratio is. The answer is 0.87%. Cheap enough to have a good chance of outperforming.

A longer version of the article was first published in the Financial Times

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.