- Discounts in investment trust sectors have prompted a flurry of share buybacks
- We look at which trusts are doing them consistently and which are not
- It’s harder for trusts with illiquid portfolios
Buybacks are one of the key tools investment trusts have at their disposal to try to reduce their discount to net asset value (NAV). Given the persistence of those discounts in 2023, it's no surprise that buyback activity has been pronounced this year. In the first nine months of 2023, investment trusts bought back £2.8bn-worth of shares, a 34 per cent increase on the same period last year, according to Morningstar and Winterflood data.
Buyback programmes alone are unlikely to succeed in closing big discounts, especially in a tough environment like the one in which trusts currently find themselves. But the argument in favour of the strategy asserts that they demonstrate a board’s focus on shareholder returns and its confidence in the portfolio, as well as helping reduce discount volatility and clean up the shareholder register by offering an exit to those who want to sell.