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Shares in Edinburgh trust plunge on Woodford exit
The Edinburgh Investment Trust, Neil Woodford’s only closed-ended fund, is coming under pressure on news the star manager is leaving Invesco Perpetual to form his own boutique.
Edinburgh enjoyed a 5.5% premium to its net asset value yesterday, having consistently traded on a premium of around 5% for several months.
This has already been wiped out, however, as Edinburgh's share price immediately plunged by 5% - making it today's sharpest faller on the FTSE 250.
When Woodford assumed responsibility for the trust from Fidelity in 2008, it languished on a 10% discount.
‘I think it is a fair assumption that the reason the trust was the highest rated in the sector was because of Woodford (pictured, left), so a lot of money will leave with him,’ commented Monica Tepes, an analyst at Cantor. ‘In the short to medium term I expect the rating will be under pressure. To what extent, it is hard to say.’
‘This appears to be disappointing news for Edinburgh Investment Trust and we would expect to see the premium erode and discount widen,’ said Iain Scouller, an analyst at Oriel Securities. ‘If Mark Barnett (pictured, right) is named as the new manager for Edinburgh, that will give investors some comfort, as he has done a good job managing the Invesco Perpetual Income & Growth Investment Trust .’
Paul Locke, an analyst at Westhouse Securities, supposed that the share-price weakness could therefore represent an attractive entry point as Edinburgh retreated from its expensive peak. ‘There is a nice handover period and undoubted strength in depth in terms of succession management,’ he noted. ‘I would not expect any material change in style and quality, so this could create a potential buying opportunity in the stock.’
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