Investment trust share buybacks reached a seven-year high in April, driven by concerns over arbitrageurs and broadening discounts.
The £272m of repurchased stock was the highest monthly total since January 2001. More than half came from two trusts. JPMF mercantile bought back £83m of stock and ML world mining repurchased 5.8 per cent of its share capital with a value of £55m.
ML world mining was taking advantage of its discount being around 6.5 per cent compared with its 11.2 per cent average in the past year.
Wins analyst Charles Cade says: “The pace of share buybacks has picked up in recent months and the total amount of stock repurchased in April was the highest monthly total since January 2001. In our view, this may reflect the recent publicity over arbitrage stakes in Witan and Foreign & Colonial investment trust.”
Witan has also been continuing its policy of buying back shares to meet its stated policy of keeping its discount below 10 per cent.
Marketing director James Budden says Witan has bought back 10 per cent of its shares in each of the last three years and was another trust buying its shares back last month.
He says: “This is part of our stated policy of managing our discount but we have to be careful how we do it or the market will expect it.”
But Budden says it is unfair to suggest that the big international generalist trusts, such as Witan and F&C, are targets for abitrageurs because they are complacent.
He says: “It is an interesting move that arbitrageurs, such as Carousel and Laxey, have come on to our share register but we do not need to be woken up. Just because we are big does not mean we are sleepy and we are going through a process of change to maintain our performance, much as F&C is doing.”
