The average investment trust discount to net asset value (NAV) was 3.4 per cent at the end of 2013, the lowest since records began in December 1970, demonstrating strong investor demand for investment trusts.
Ian Sayers, director general of the Association of Investment Companies (AIC), says: "A strong period of performance, the dividend track record, access to specialist asset classes and the impact of the retail distribution review (RDR) have all come together to boost interest in investment companies."
During the credit crunch, the average discount widened out to 16.6 per cent in December 2008, the highest since the 1980s, before returning to single digits in October 2010, reports the AIC. Investment trust average discounts have at times come close to 2013's record low, such as in February 2006 when the average discount was 3.5 per cent, while in October 1976 it peaked at 41.5 per cent.
Since the implementation of RDR in January 2013, financial products such as open-ended funds can no longer pay commission to financial advisers, putting funds such as investment trusts which do not pay commission on more of an equal footing with them. And financial advisers who want to be classified as independent have to consider financial products across the market, including investment trusts.
"Of course, it's important to be aware that while the average discount is at a record low, discounts vary across the industry," says Mr Sayers. "Investors need to have a balanced portfolio and research potential investments thoroughly."
A number of trusts are on premiums (over 100, according to Numis Securities) while for some discounts have widened, in particular those in Asian equity sectors which have been out of favour. Examples include IC Top 100 Fund Aberdeen Asian Smaller Companies (AAS) (see the article on smaller companies funds).
