James Carthew: Where is investment companies’ Brexit dividend?
In many articles over the past few years, I have expressed frustration that investment company share price discounts seem to be divorced from reality. Initially, this was centred around private equity funds, but over the past 12 months or so the problem has widened to encompass much of the closed-end fund sector.
Investment companies have not only seen their share prices fall further behind their underlying asset values, but their discounts have also been more volatile than usual. In addition, private investors frequently complain to me that bid-offer spreads on their shares have increased dramatically, making trading in the stocks more expensive.
There is a real underlying problem here but one with a very simple solution. Please bear with the technical aspects – they are important – and the length of this – there is a lot of ground to cover.
To uncover it, we must go back a decade to the introduction of the Alternative Investment Fund Managers Directive (AIFMD) in 2013. Ahead of this, investment companies had been regulated as companies – subject to listing rules, companies acts, their fund managers regulated, required to comply with accounting standards and watched over by directors with fiduciary duties.
read more here