AITC director general Daniel Godfrey says he remains "aggressively positive" about the role of invest...
"Investment trusts will probably perform better than a unit trust over time, but you are likely to have a bumpier ride, although that is not true of all investment trusts or unit trusts, nor is it true at all times." Godrey said at a meet-the-press meeting at AITC headquarters in the City.
He added that holders of shares in highly geared split capital investment trusts, some of which have come perilously close or even broken their banking covenants in the past two weeks - such as the Quilter Global Enhanced Income Trust - should not despair.
"The positive message is that in a way the worst is happening," he said.
"From here new split cap trusts, although some people are not likely to rush into the marketplace, are actually being launched at a very good time. This is a function of the market, it is now weeking out some the weaker structures, some of these weaker structures are being 'found out'if you like, and that is ultimately helping."
"That is no consolation to the relatively small number of private investors who may be in some of these, because most of the investors in them are actually other institutions. But this does happen in markets from time to time when we get reminders that it's not one-way traffic and that 'caveat emptor' actually means something."
An AITC spokeswoman added that the association's official position on the issue of gearing in split capital trusts was that some trusts had "pushed the level of debt to the limits in these markets."
However, the organisation also felt that discussions with investment trust managers and their boards indicated banks were not about to pull the rug from under companies that breached their covenants.
Instead, as in the case of Quilter, the trusts will have to adopt changes such as recapitalising by issuing new shares to either boost assets, reduce debts or both.
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