Financial Journalists & Investment Trusts

The average employment period for financial journalists is eighteen months, so its not surprising that many of the pieces they submit for publication demonstrate a lack of knowledge of the subject they are writing about. Misleading articles merely add to the levels of financial confusion, the blind leading the blind. My advice to journalists, if you do not know your subject in depth – talk to people who do, before completing your assignment.

I have recently seen some very poor articles about Investment Trusts. It is always difficult to choose what level to address your audience so that they can understand your words and meaning. A recent article by a young journalist for the “Investors  Chronicle” clearly took this to heart and when explaining the complexities of discounts and premiums, as in the article she was stating the “blooming” obvious.  That would have been OK except the examples she provided  in her blindingly obvious text demonstrated her failure to do her homework. She pointed out that investors should be careful when buying investment trusts at a premium, the trust she singled out as an example was Lindsell Train Investment Trust (now at a premium of 46%). However, she failed to mention that the premium is partly due to the fund’s large stake in its unlisted parent investment company. Many professional advisers consider that Lindsell Train is undervalued (even with the premium).

Another article penned in a rival financial magazine “Shares” quoted  a property investment trust, Alpha Real Trust as “expensive” as it compared its stated discount to be below its average discount for the year. So, by referencing this to the “Z score”, it highlighted the poor value on offer. Surely as a professional you cannot take any statistic at face value, how about looking at the impressive performance of this trust over the last few years and also the unusual structure of the trust.

The article went on to to point out that another investment trust  Oakley Capital was also “expensive” for the same reason, namely a lowish discount to its average discount was also highlighted. Despite not being a prominent investment trust, Oakley is well regarded by professionals. Clearly a better knowledge of the current situation of this trust might have influenced the writer of this lazy article.

It’s a universal truth that change is constant, what is particularly exciting about individual investment trusts is that many of them change over time, as an adviser you need to put the work in to keep up with events, so that your clients can benefit from the many opportunities they provide.

I am due to meet a prospective client shortly, he has assured me that he does not like to take risks. Included in his portfolio is an investment trust that used to be a steady performer but has changed its spots and has soared in value and is now at a premium of 22%. Clearly the client is blissfully unaware of this risk and he might consider switching to another investment trust at a discount of 6% which has a better long-term performance.

Please note that the mention of the above investment trusts does not constitute advice. It is a reminder that you should not believe everything in the investment press. Always take advice from a knowledgeable adviser.

What’s lurking in your portfolio?

Ray Best is a resilient Financial Planner with a unique approach to investment planning, his work ethic has propelled him from humble beginnings to be voted as a top UK Financial Planner by Vouched For (as published in the Sunday Times). These days he works with families with large investment portfolios or big inheritance tax liabilities, the first step, is to book a Discovery Meeting HERE.

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