PA ANALYSIS: Time to pick the winners from the ‘end of austerity’

Added 9th August 2016

Investment trusts have demonstrated impressive post-referendum resilience in recent weeks, with top-level macro swings indicating positive things to come for real assets.

PA ANALYSIS: Time to pick the winners from the ‘end of austerity’

According to Winterflood, the average discount across the universe narrowed to 6.9% at the end of July, compared with 8.6% at the end of June and 4.5% at the start of this year.

Research analyst Simon Elliott notes that the vast majority of subsectors saw their ratings strengthen last month, with technology the strongest followed by UK property and infrastructure, the latter two sectors the largest in terms of real assets.

Indeed, infrastructure is the only investment trust sector trading on a premium at present. This might suggest that value investors might wish to steer clear.

However, for Rory McPherson, head of investment strategy at PSigma Investment Management, a shift away from austerity in major economies will be a boon to the sector as governments look to “grease the wheels of the economy” with infrastructure spend on high-level projects.

For now, the team prefers to play the sector through equities, as he explains: “Spending on infrastructure projects will provide a tailwind for infrastructure equities and is one of the reasons we have chosen to initiate an investment here.

"The sector average for UK property narrowed sharply from 12.4% to 7.9% during July"

“Others being its diversification properties, attractive yield, defensive and predictable nature, combined with its inherent inflation protection.”

He adds: “We’re not calling a rampant rise in inflation but do think the disinflationary environment we’ve been in should dissipate as the boot gets taken off the foot of monetary policy and placed on that of fiscal spending as governments cash in on the record low bond yields.”

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Gary Shepherd


Portfolio Adviser

Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.



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