Thesis Asset Management has dumped its closed-ended holdings in its model portfolios in favour of open-ended funds as the firm’s concerns about liquidity increases.
James Nield, investment manager at Thesis, said the investment team had sold some of the closed-ended funds after “a good spell”.
“In the main, we have shifted to open-ended products because they provide the liquidity we need,” he said. The group now has only two or three investment trusts across its portfolios.
Demand for trusts has been increasing in recent years but investors have growing concerns that those of less than £200m in size are too small to make viable investments in.
At a recent Winterflood Securities conference, the group said 9 per cent of its delegates admitted they would not consider buying a trust with a market capitalisation – or total stockmarket value – of less than £200m. This is up from just 1 per cent last year. Winterflood said roughly 170 investment trusts, or 56 per cent of the industry, were less than £200m in size.
Elsewhere, Thesis has been raising its cash weighting across its portfolios. The group’s cash weighting is now between 4 and 9 per cent.
Mr Nield said this was a result of the group’s expectation that equity markets’ ability to withstand the increasingly bad geopolitical news was fading. However, Thesis thinks equities offer good opportunities in the longer term. Mr Nield noted the yields on offer from equities are better than those available from fixed income markets.
The FTSE All-Share index is currently yielding around 3.5 per cent, while 10-year UK gilts are offering roughly 2.1 per cent.
