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Widening discounts are triggering continuation votes in some parts of the investment trust sector, according to analysts.

Although continuation votes are a regular occurrence in the industry, widening discounts in some sectors have activated discount control measures.

Simon Elliott, head of research at Winterflood Securities, said discounts for most sectors tended to be narrowing, but there were exceptions.

“Property funds are on incredibly wide discounts, as are private equity and hedge funds,” he said.

Mr Elliott said there had been some discount volatility in recent months, which had been coupled with the turmoil in the wider economy.

However, he said current economic conditions had not had as big an impact on investment trusts.

“Normally at this stage of the market we would expect discounts to be wider,” he added.

The hedge fund sector has been hardest hit by widening discounts, with a number of continuation votes scheduled for later this year.

Tom Skinner, an analyst at Cazenove, said several listed hedge funds were at risk of triggering discount control measures – which include continuation votes – in the coming weeks.

“Several funds have already responded with tender or continuation vote proposals. Several more are in the process of reviewing their strategic options,” he said.

According to Mr Skinner, current discounts are offering investors substantial value with the prospect of some capital being returned.

He added: “The sector is under intense pressure, however, given the amount of capital at risk from exiting the sector in the coming months if continuation votes fail or tenders are fully subscribed.”

Mr Elliott said in the past arbitrageurs had forced continuation votes for investment trusts when discounts had widened.

However, he said continuation votes were a natural part of an investment trust’s existence.

Eight continuation votes are scheduled by the end of the year in accordance with the funds’ terms and resolutions passed at AGMs. Two trusts also face winding-up votes.

“The bottom line is most investment trusts will have continuation votes. Very few have an indefinite life span,” he said.