Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a290010

Value to be found in discounted small-cap investment trusts

by Matthew Goodburn on Dec 14, 2007 at 14:19

Small-cap and fledgling investment trusts are now near universally trading on double-digit discounts.

The trusts suffered a savage de-rating as investors begun favouring large-cap stocks. But the de-rating has been indiscriminate and has left some attractive investment opportunities in its wake.

Recent volatility and concerns over a liquidity crisis have also hurt sentiment in the sector, with some investors wondering where the support will be for smaller firms in troubled times.

By mid November the 13 investment trusts in the AIC UK Smaller Companies sector were trading on an average discount of 15.3%, while the three trusts in the AIC Fledgling sector, Active Capital , Eaglet and Gartmore Fledgling, were faring slightly worse, averaging a 15.6% discount.

Eaglet , which until October was managed by Unicorn Asset Management founder Peter Webb, has seen a well-documented corporate action led by Knox D’Arcy, QVT and Laxey, who together with other arbitrageurs control around 39% of the trust.

After its EGM on 11 December, the arbs had successfully managed to put three new directors onto the board, with a potential brief to change the investment strategy to improve performance.

Perhaps in acknowledgement of the difficulties facing the sector, Gervais Williams’ £98 million Gartmore Fledgling trust is looking to boost its investment powers by having the flexibility to invest up to 20% of the portfolio in companies that have dropped down to AIM from the main index.

Renowned arbitrageur Laxey Partners has taken a stake in the third fledgling trust, Active Capital managed by Bill Brown of Bluehone Investors, which has a commitment to grow its share price from 100p at launch to 222p by its annual general meeting in 2009.

The last three years have been weak periods for all three managers but their longer-term track records are strong.

This, coupled with the fact all three trusts seem to be facing shareholders or using strategies set on closing the discounts, make all three trusts an option as an each-way bet.

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

The Citywire guide to investment trusts

Investment trusts have proved to be a highly effective way to invest in the market. Citywire has interviewed the experts to find out more.

Sponsored Video: Barings on investing in Frontier Markets


From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:

Look up the investment trusts

  • Active Capital Trust (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Eaglet (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Gartmore Fledgling Trust (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet