BlackRock trust brings in zero discount policy

The board of the £41.4m BlackRock Income & Growth investment trust has voted in favour of new measures to control its discounts, amid calls for the measures to be adopted across the industry.

The trust’s decision to adopt a zero discount policy obliges the trust to use measures such as buying back or issuing shares to keep its share price as level as possible with its net asset value.

This prevents its investors from losing out if negative sentiment sends its shares crashing to a ‘discount’ to its net asset value.

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The trust, which has been managed by BlackRock’s Nick McLeod-Clarke and Adam Avigdori since April last year, is currently trading at a 7.8 per cent share price discount to its asset value.

The move comes a day after Investment Adviser reported that investment trust analysts had backed calls for more investment trusts to employ the policies.

Ian Sayers, outgoing chief executive of the AIC, told Investment Adviser last week that he was cautiously in favour of at par discount control.

“I agree with the sentiment,” he said. “Absolute discount is an issue, volatility is unattractive, and this does give boards more options. A lot of trusts have moved to premiums and can issue shares to meet demand.

“They need to look at what they are going to do if sentiment turns.”

In the three-year period to January 25 the BlackRock Income & Growth trust’s share price delivered total return of 25.7 per cent, while its portfolio of assets rose in value by 29.6 per cent.