Congratulations on your work on UK investment trusts. I have studied the sector for 40 years and as you know used to present it at David's "Markets Now" evenings. The key reason why retail savings vehicles like the IT sector maintain dividends better than most is that they are permitted to pay dividends out of reserves. This means that in bad years, they can "borrow from the future" and smooth those dividend payments over time. Investors need therefore to check the precise statutory position of each investment trust before buying as there may be technical impediments to the use of reserves. They are a wonderful sector to invest in longer term, and the collapses in markets have widened discounts in many cases. I strongly suggest you do a similar analysis of IT sector discounts. You may find some great Easter presents, even if Easter in 2020 has been cancelled because of Covid19. Keep up the good work. Iain

Eoin Treacy's view

Thanks for the words of encouragement and the additional intelligence on mechanics of how some investment trusts are capable of sustaining their impressive records of dividend growth.

I know David was always keen on picking up positions in investment trusts when they were trading at historic discounts so I agree it is certainly a topic for further study. I have been searching for additional intelligence on the investment trust sector with a particular focus on trying to find average discount data. So far, I have not had any luck with finding it elsewhere so I have resolved to generate it myself.

Bloomberg does have average discount data on the system. However, this is not available for export on a bulk basis for the universe of investment trusts. Instead I have downloaded the last twenty years of discount/premium data for 240 investment trusts. It’s going to take me some time to compile the data for average discounts versus current figures but I certainly hope to have it in an accessible fashion by Easter.

The big question from a data perspective is how much history to use in compiling an average. Take the contrasting discount history of the Scottish American Investment Company (SAIN) with that of the Blackrock World Mining Trust (BRWM).


SAIN habitually traded at a wide discount to NAV until about 2010 when the discount tightened up considerably. From 2017 until March it traded at a premium and following the spike lower is now back at a premium. Taking a long-term average for the last 20 years, the discount is about 7%, but over the last 3 years it is at a premium. There is a strong likelihood attributes individual to the management of the fund have resulted in the movement to a premium which are not reflected in the data. Meanwhile BRWM seldom trades at a premium, but wide discounts have been buying opportunities.

Considering these two rather different examples of investment trust I believe the best course of action is to an average of about 10 years where wide overextensions relative to the mean are either likely to be buying opportunities are worthy of additional investigation.