Investment trust insider on rebuilding Britain – James Carthew: Trusts must invest capital, not buy back shares forever
New regulation could narrow share price discounts, allowing trusts to reallocate capital into areas that need it, such as infrastructure and private British companies.
Post the election, a sense of optimism is emerging in the UK. For the investment companies industry, the good news is that a legislative solution to the cost disclosure issues that have beset the sector is back on the agenda. On 5 September, Baroness Sharon Bowles will be introducing a new bill to the House of Lords to replace the one lost to Sunak’s decision to press the self-destruct button on his government early.
More encouragingly, the Treasury’s new growth minister and financial secretary, Lord Spencer Livermore, has acknowledged the issue and promised that the government will look at the rules. Hopefully, this would lead to a swifter resolution of the problem.
My hope is that we can revitalise the sector and use it as an engine of economic growth. An important part of that would be providing capital to help fund new renewable energy and energy efficiency projects.
That need not rely on a recovery in share prices to the point where these companies can raise new capital. Instead, if discounts narrowed to a point where the clamour for sales of assets to fund buybacks eased, the focus could switch to recycling capital from largely de-risked, operational assets to new projects. That would provide the prospect of faster net asset value growth.
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