Credit Lyonnais research highlights plenty of changes in market over 18 months
Over the past 18 months there have been 60 newly issued investment trusts, of which 28 were split caps and 11 were quasi splits, according the Credit Lyonnais Investment Trust Year Book 2001.
Looking at the investment trust industry from January 2000 to June 2001 there were 27 reconstructions and rollovers of trusts, of which six were reconstructed into splits while two others offered rollovers into other split-cap trusts.
In the course of the past 18 months, 15 trusts changed their policy and investment objectives, with a large number of those changing their focus to growth through investing in technology, media and telecom-related companies.
For example in March 2000 the Framlington 1000 Smallest Trust became the Framlington Innovative Growth Trust, with a policy change to achieve capital growth through investment in companies embracing new and evolving technologies.
Also over the past 18 months, 11 trusts were served with requisitions, two trusts were merged, 19 were wound up and 41 changed their names.
According to the annual book, despite difficult market conditions discounts have narrowed significantly over the time period. Alan Ray, analyst at Credit Lyonnais, said: 'This narrowing could be partly attributed to the investment trust sector's outperformance of the FTSE All-Share, although we suspect that to a larger degree, share buybacks were the main contributing factor.
'The secondary market was not characterised in 2000 by large blocks of institutional 'overhang' stock being sold in the market, and smaller buybacks therefore had a greater material effect on discount ratings.'
Ray said the group also suspects that the lack of discount downside pressure on the sector can, in part, be attributed to the current nature of the markets, which are notable for the lack of any consensus as to direction.
Ray said: 'All one can safely say about the discount level is that over the last year or two the balance between buyers and sellers of investment trust paper has shifted to some degree towards the buyers.'
The trust that saw its discount move the most between the end of 1999 and the end of 2000, was Prelude which went from a discount of 29.74% to a premium of 44.39%, an absolute change of 74.13%. Second was the 3i Group, which moved from a premium of 8.39% to a higher premium of 52.11%, an absolute change of 43.73%.
The trust which saw its discount move most the wrong way was Korea Liberalisation, which moved from a premium of 34.53% to a discount of -35.48%, for an absolute change of -70.01%.
Ray said in summary, while there were many divergent themes running through the sector during the past 18 months, all paths seem to lead back to the issue of liquidity.
He said: 'Liquidity has deteriorated during this period and has contributed towards the demise of at least one market maker. In order for the investment trust market to thrive, it needs to address this issue, and may have some hard pills to swallow.'
The 74th edition of the Credit Lyonnais Investment Trust Year Book is now available. It contains performance tables, profiles of every investment trust available to the UK market, their management groups, plus a series of viewpoints written by different fund groups and managers.
For a copy contact: 020 7588 4000.
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