- Gearing can amplify or detract from an investment trust's returns
- Expensive debt can also eat into a trust's returns
- Some trusts focused on niche markets usually have high levels of debt
With investor sentiment slowly improving, investment trust shareholders have started to claw back some of the hideous losses incurred in 2022. But they should arguably care more about how bullish the investment teams that run these trusts are now, and whether their portfolios are positioned to take advantage of market rises or instead reflect a more cautious stance.
With this in mind, it’s also worth looking at which equity trusts are more heavily loaded up on market exposure via use of gearing (debt). Stated levels of gearing can at times reflect a trust's prior performance, with a decrease in its net asset value (NAV) causing the figure to rise. Nonetheless, many trusts continue to run high levels of gearing, which should amplify the gains or losses made by their holdings.