Winterflood: Investment trust sector underperforms in August

The Winterflood Securities research team - Simon Elliott, Kieran Drake and Innes Urquhart - rounds up August's highs and lows in the investment trust sector.

The team stress there is always likely to be a tail of funds in which secondary market liquidity is poor - the analysis below suggests the majority of investment trusts offer "reasonable liquidity" and at the larger end of the market.

Overall Elliott, Drake and Urquhart conclude "liquidity is good".

Investment trust sector underperforms in August

August was a quiet month for issuances, with £279 million raised across the investment trust sector compared with £1.05 billion in July. However, so far in 2013, £4.1 billion has been raised compared with £2.1 billion at the equivalent stage last year.

The FTSE All Share was down for the second month this year with a decline of 2.2% in August. Investment trusts underperformed for the fourth time in six months, with the FTSE Equity Investment Instruments Index down 2.5% in August. So far this year the investment trust sector is up 12.1%, behind a rise of 13.3% for the FTSE All Share.

The average daily volume for the top quartile by size was approximately £1 million. In the year to the end of August, 30 funds had average daily traded volumes of more than £1 million. These included: 3i Group, HICL Infrastructure, Templeton Emerging Markets*, Alliance Trust and BlackRock World Mining*.

There were a further 36 funds with average daily volumes of more than £0.5 million which include Electra Private Equity, Personal Assets and JPMorgan Global Emerging Markets Income.*

August 2013 investment trust action round-up

There were no initial public offerings in August, although Better Capital raised £186 million for its 2012 Cell.

Last month the subscription shares for Mark Barnett's Perpetual Income and Growth* expired, raising capital of £28 million.

Read more about the manager's investment strategy in:Barnett: Why dividend growth beats yield.

Crystal Amber placed shares at a 3% premium raising £26 million.

Earlier in August, Twenty-Four Income Fund raised £30 million through a placing.

Taliesin Property Fund, which invests primarily in German residential property, raised £12 million through issuing zero dividend preference shares (TPFZ) with a repayment date of September 2018 and a gross redemption yield of 7.5%.

In other corporate activity, Aberdeen All Asia is looking to adopt a Japanese-only mandate and raise up to £100 million through a C-share issue.

BlackRock Latin American, managed by Will Landers, has repurchased the majority of its convertible bonds through a tender offer with a view to converting or redeeming the remainder.

The Marwyn Value Investors is seeking shareholder permission to make new investments following a placing of over 40% of its share capital at a discount wider than 30%.

Following a difficult period for performance, Pacific Horizon is proposing biannual 5% tender offers at a 2% discount to net asset value less costs.

Hansa Aktiengesellshaft, a Switzerland-based investor, is to acquire SVG Investment Managers, which runs Strategic Equity Capital, from SVG Capital.

* The company is a corporate broking client of Winterflood Securities.