A first-half home run for investment trusts

The investment trust sector has seen some extraordinary performance in the first half of this year. Max King looks at what's behind it, and asks: is it set to continue or is it just a flash in the pan?

London Stock Exchange
Investment trusts have beaten the wider market by a significant margin
(Image credit: © Bloomberg via Getty Images)

Anyone who predicted the market crash of the first quarter, in which the FTSE All-share index fell by 35% in five weeks, would also likely have predicted that investment trusts would under-perform, due to widening discounts to net asset value (NAV – the value of the underlying portfolio) and the debt employed to enhance returns in rising markets (also known as gearing).

Those were certainly negative factors on the way down. The average discount widened from 2% to 22%, before narrowing to 11% on April 3rd.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.