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Investment View

I am not much of a football fan but last week definitely looked like a

game of two halves. A lacklustre opening for the week turned into quite

spring-like behaviour as technology issues shrugged off the gloom that has

surrounded them recently. I admit to becoming a little nervous over the

prospects for our own technology conference due in less than a week&#39s time.

Who wants to hear about yesterday&#39s sector? But, believe me, technology is

anything but history.

Technology has been in the news with the pasting that Jupiter has received

over the launch of its new fund. How much more relaxing for me to be back

at another AITC forum for IFAs, held this time at Haydock racecourse.

Sadly, there was no race meeting taking place. I accept that we may have

had trouble enticing advisers inside from the stands if that had been the


I am beginning to think that the AITC and I have developed a racing

exclusion zone between us. Last time I spoke at one of its forums, it was

Gold Cup day. That I was unable to get from Cornwall to Cheltenham was

mitigated only by the fact that no one invited me that year. At least one

fund management group needs its wrists slapped.

A second disappointment was the absence of questions from the audience at

the end of the session to which I contributed. You could say that the

speakers had delivered such erudite discourses that questions were

unnecessary. The reality was that the audience was keener to dive into

lunch than learn more about investment trusts.

Preparing for a talk like that is always interesting. Like a bride&#39s

trousseau, you need something old, something new, something borrowed and

something blue. In this case, the something blue was the joke I dropped at

the end for fear of offending lady IFAs – of which there were a number.

Despite offering to regale anyone who cared to meet me in the bar

afterwards, I found there was singular lack of interest in the less savoury

antics of stockbrokers.

The new, for this particular talk, was a look at the long-term movement in

trust discounts. The broad trend appears clear. The “its” campaign has made

a difference. Investment trust discounts have narrowed although, just

recently, they are widening again, perhaps as a consequence of a

considerable amount of portfolio rebalancing among professional managers.

The longer-term trend reminds me that, back in the early 1970s, discounts

nudged 40 per cent. Then I ran an investment trust management service,

launched close to the peak of the bull market that ended in 1972. The two

or so years that followed were an investment manager&#39s nightmare.

It is reasonable to assume that those days will not return. Deep discounts

generally result either in takeover bids by other trusts or companies

seeking to raise money cheaply or a change of manager. Even so, I find it

amazing that some sound, well-managed and very solid investment trusts

still stand at hefty discounts. There is plenty of value in this sector.

Watch the news updates on Reuters and you realise that the old order is

crumbling fast. Even if it will not necessarily be new Turks who end up

running the show across a variety of industries, there is no doubt that

existing businesses are set to change the way they operate to take account

of the wider competition that now exists and the inexorable downward

pressure on costs that is so much a feature of current corporate life.

Being an investment manager in this situation means that you need to keep a

close eye on the companies you are favouring with your support.

For investors in funds, the responsibility is just as great. There have

been sufficient defections or outright departures of managers within this

industry to demand careful monitoring of the funds you hold.

Next week looks set to deliver an even more interesting schedule of

events. Nuns, the internet and Paris will feature in far from equal

measure. I look forward to sharing with you the brighter moments from the

middle of the month when, so far as history is concerned anyway, we should

all have liquidated our portfolios and headed for the country. I suspect

there may be more to this old adage for the current year than we have come

to believe from past experience.


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