Times are still tough for many investment trusts. Although performance is improving, interest rates are on the way down, and cost disclosure rules are being reformed to their benefit, many structural challenges remain. Shares' persistent discounts to net asset value are in part explained by a lack of liquidity, which has contributed to an increase in consolidation.
We’ve previously highlighted some of the trusts that could fall by the wayside. It’s worth considering that private investors have a role to play here, too. Their increased presence on shareholder registers over recent years means that, in some cases, they could be the deciding factor in whether a trust survives or seeks a wind-down or merger.
Size isn’t the only reason why trusts are merging (see this week's news that the £600mn Asia Dragon (DGN) is to combine with Invesco Asia (IAT)). But reaching a viable scale is seen as increasingly important given big professional buyers don’t tend to look at portfolios under the £250mn mark.