Trusts could be the star of your portfolio: Cash in by backing Sage of Omaha Warren Buffett and The Beatles
By ANNE ASHWORTH FOR THE DAILY MAIL
PUBLISHED: 21:50, 16 October 2020 | UPDATED: 08:48, 17 October 2020
A number of investment trusts have come to the market in recent weeks. These include the successful launch of Home, which will invest in homeless accommodation, mentioned here earlier this month…
New issues create a stir, but once the initial excitement is over, most trusts will go to a discount, which may be the better time to buy.
Subscribing to a new issue makes more sense if it is in a niche sector, which is why Home’s mix of yield and social purpose was appealing. But there is a growing realisation that investment trusts, sometimes seen as old-fashioned, can be a good deal in 2020…
Greencoat UK Wind supports renewable energy. The soon-to-be-launched Round Hill Music Royalty will own rights to some hits of The Beatles (pictured top left) and The Rolling Stones,and offers a 4.5 per cent yield.
A significant disadvantage of the investment trust is the chance that it will fall to a discount – that is when its shares are worth less than the value of its assets. James Carthew of QuotedData, the analytics group, argues that discounts should be seen in another way: ‘When excitement builds up about a trust, it goes to a premium.
‘The discount serves as a pressure valve – it can also be a way to make money.’ So if you buy at a discount, you have purchased assets for less than they are worth, so stand a chance of profiting.
For those with a taste for adventure, Carthew highlights Henderson Opportunities, a UK tech trust at a 19.7 per cent discount, with a yield of 3 per cent. Interactive Investor likes F&C, where the discount is 9.9 per cent. Baillie Gifford UK Growth, on a discount of 4.7 per cent and with a yield of 3.2 per cent, is less intimidating.
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