Big investment trust themes to watch in 2021

Big investment trust themes to watch in 2021

by Faith Glasgow from interactive investor | 11th January 2021 12:22

We highlight the trends and themes for investment trust fans to keep an eye on over the next year…

Board activity

One of the most significant themes of 2020 has been the run of manager changes, closures and consolidations in the industry. In itself, it is unsurprising, as Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC), observes: “There is normally quite a lot of this sort of change when markets are tough.”…

Dividend challenges

Businesses worldwide have been impacted by the pandemic and many have had to cut or suspend dividend payments to shareholders. That has had a knock-on effect on equity income funds’ ability to make payments, but closed-ended funds have been much more strongly placed than their open-ended peers…

Moreover, some non-equity areas have proved extremely resilient in terms of reliable income, including infrastructure, logistics and specialist debt.

But there remains a question mark over the state of equity dividends in 2021, says Simon Elliott, director of investment company research at Winterflood…

“Are we seeing a fundamental rebasing of equity yields? I think many will be very reluctant to keep paying out of reserves if so. It is a big question, particularly as 2021 rolls in and we see the full-year impact of cuts in portfolio income.”

IPOs and new issuance

..IPOs, meanwhile, were practically non-existent until autumn. But an upturn in risk appetite since October, together with new opportunities and pent-up demand, has turned that dearth around to some extent…

James Carthew, head of investment trust research at Quoted Data, makes the point that the bulk of both secondary issuance and IPOs has been “on the back of the green agenda”. He adds: “They have generally been income plays as well, with yields of 5% to 7% and progressive dividend policies common.”

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