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The Closed-end Fund Sector
The UK investment trust universe consists of 300 companies with a collective market cap of £78bn and aggregate assets of £99bn.
The vast majority of closed-end funds outperform directly comparable open-ended funds and relevant benchmarks.
RDR implementation is raising awareness as investment trusts gain relevance.
Closed-end funds tend to have lower Total Expense Ratios than similar open-ended funds.
Despite extensive corporate activity over the last decade and outperformance over open-ended equivalents, the investment trust universe remains undervalued.
Discounts have tightened over the long term, but significant volatility remains.
Nearly half of funds trade on discounts in excess of 10% with many over 20%.
The adoption of discount control mechanisms has been a stabilising factor, but implementation has been patchy.
Unloved sectors frequently hide high quality investments at attractive valuations.
Universe gives access to talented managers and attractive sectors with strong long-term track records, often available on attractive discounts.
Pricing inefficiencies have increased in recent years with the issuance of securities such as Convertible Unsecured Loan-Stock (CULS) and Subscription Shares.
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