Investment trusts boosting liquidity: Winterflood
Investment trusts have engaged in a major effort this year to improve their shares’ liquidity, or the ease with which they trade in the market, according to research by Winterflood Securities.
The trust industry has bought back £531m of shares in 2012 so far. In June alone trusts bought back £93m of their own shares, an increase of 13 per cent on the £83m recorded in May.
According to AIC data based on 289 investment trusts, excluding venture capital trusts (VCTs), the average trust sees £308,000 of shares traded per day.
However, for the nine trusts with a market capitalisation of £1bn or more, the average trade of shares is £2.46m a day, which drops to £939,000 for the 24 funds with a market capitalisation of between £500m and £1bn.
But while this suggests that larger trusts are more liquid, Winterflood said this was not always the case.
Of the 20 largest investment trusts the top two – the £4.18bn 3i Group and the £2.63bn Alliance Trust - are the most traded, according to data from Winterflood Securities. However, the £1.26bn BlackRock World Mining trust was the third-most traded fund in the year to July 3 but only the ninth largest investment company.
Of the top 20 most-traded investment trust stocks, eight have less than £1bn in total assets. The top 50 include a number of specialist sector companies, particularly in infrastructure and emerging markets.
James Brown, investment companies analyst at Winterflood Securities, said: “There are currently 60 funds which are trading on a premium, or a discount of less than 1 per cent. This allows these funds the possibility to issue new shares to satisfy demand in the market.
“Some of the largest proponents of this have been Murray International, which has issued new shares worth £53m in the first half of this year. Others include Personal Assets, at £68m, and City of London, worth £25m. In total 169 funds traded an average of at least £100,000 [of shares] per day over the past year.”