Most of the investment managers who make money are the ones who invest in markets which are out of fashion. The zeros scandal has made many investors avoid the investment trust sector altogether. However, I believe the time is now right and, in fact, a recovery has already begun.
The fund manager I most admire in this sector is Nick Greenwood, formerly of Christows. The funds managed by him were rated first, second and third in the FSA-recognised offshore equity global category.
He now runs the iimia accelerated fund, which is the first retail product launched by this firm of independent investment managers. Since it was launched on April 30, it has already attracted over £5m. It holds around 37 of 400 investment trusts listed in the UK.
Greenwood is a specialist at buying undervalued assets. For example, he bought Henderson smaller companies investment trust at a discount of around 30 per cent and sold it again when the discount fell to 12 per cent. He has reinvested this money into a deeply unloved and overlooked trust, Framlington innovative growth, managed by Brian Watson and Roger Whiteoak.
Since Greenwood's fund was launched just over three months ago, it has risen by around 20 per cent against the rise in the FTSE All Share index of only 8 per cent. In my opinion, there is a lot more to go and, as Greenwood says, investing in an investment trust now offers scope to capture a powerful combination of rising net asset value and narrowing discounts.
The investment trust sector is cyclical. The years 1999 and 2000 saw big profits but over the last year or two investment trusts have suffered to a huge degree and many are now much undervalued. This is certainly an investment that all IFAs should consider for their clients.