Selling Investment Trust to go in ETF

[TimR]

Over the last 12 months I have been steadily selling some legacy Investment Trusts and investing the proceeds in ETFs. Some of the remaining ITs (Aberforth Smaller Companies (ASL) and Standard Life Equity Income Trust (SLET) ) are at quite a large discount to NAV.

If for instance I sold ASL and invested the proceeds in Vanguard FTSE 250 (VMID) - am I suffering an initial loss as I am selling an asset which contains shares at a 11.5% discount to the market (plus trading costs) for an asset which is at contains shares at full market price with the hope of longer term gain through lower ongoing charges ?

Should I wait until the discount to NAV on these legacy Investment Trusts has narrowed as I think it could take a long time to ?

TimR

[TedSwippet]

... am I suffering an initial loss as I am selling an asset which contains shares at a 11.5% discount to the market...?

Doesn't the answer to this really depend on what the discount (or premium) was when you bought these Investment Trust shares?

[GJHarney]

Look at the AIC website for each fund as on the 'performance' tab you get a great interactive chart with the NAV discount/premium at the bottom of the page that you can look at over the past 10 years. With ASL is last had a big premium to NAV in 2007, but it was also very narrow in 2013. Today that discount is historically quite large in comparison at nearly 20% - unless you are desperate to sell personally I would wait until it narrows again. In the meantime I would check its historical performance - taking into account its reasonably large ongoing charge of 1.45% - against the performance of the ETF you want to swap it for to also see if it is really not as good as what you want to move to.

[Stanley117]

.....- taking into account its reasonably large ongoing charge of 1.45% - against the performance of the ETF you want to swap it for to also see if it is really not as good as what you want to move to.

According to the HL Website the ongoing charge of ASL is 0.8 %. Is it higher than 0.8 % or am I missing something ?

Stan

[hiriskpaul]

Over the last 12 months I have been steadily selling some legacy Investment Trusts and investing the proceeds in ETFs. Some of the remaining ITs (Aberforth Smaller Companies (ASL) and Standard Life Equity Income Trust (SLET) ) are at quite a large discount to NAV.

If for instance I sold ASL and invested the proceeds in Vanguard FTSE 250 (VMID) - am I suffering an initial loss as I am selling an asset which contains shares at a 11.5% discount to the market (plus trading costs) for an asset which is at contains shares at full market price with the hope of longer term gain through lower ongoing charges ?

Should I wait until the discount to NAV on these legacy Investment Trusts has narrowed as I think it could take a long time to ?

TimR

I have been doing much the same as you - selling ITs and buying ETFs. However, I actually bought ASL a few months ago, prompted by the large discount. The thing about ASL is that it mostly invests in smaller caps than the FTSE 250 and there are no trackers that specifically cover the markets it invests in. The best you can do is a FTSE allshare tracker, but most of that is in the FTSE 350.

I am intending to hold ASL indefinitely, but would consider selling should the discount get much below 5% again.

[GJHarney]

.....- taking into account its reasonably large ongoing charge of 1.45% - against the performance of the ETF you want to swap it for to also see if it is really not as good as what you want to move to.

According to the HL Website the ongoing charge of ASL is 0.8 %. Is it higher than 0.8 % or am I missing something ?

Stan

So sorry, my bad Stan, in my haste (I was on my way out to a meeting) I must have clicked on Aberdeen Smaller Companies by mistake. You are correct, it is 0.8% ongoing charges. Also, and for Aberforth this time, a couple of years ago the discount to NAV was just under 3%, so with it now being just under 12% again it would make financial sense to me to leave it until it narrows again (particularly as the correct charges for a smaller companies IT are fairly reasonable!).

[TimR]

@hiriskpaul and @GJHarney

Thanks for the replies. I think I will now hold onto ASL given the large discount.

The other equity legacy ITs I still own are:

Standard Life Equity Income (SLET) -5.5 % Discount

Henderson Far East Income Ltd (HFEL) + 1.5 % premium

Templeton Emerging Markets Inv Tst plc - 13.5% Discount

Utilico Emerging Markets (UEM) - -6.83% Discount

JPMorgan Japanese Investment Trust (JFJ) -10.21% Discount


As 85% of my Equity holdings are passive (in Mainly Vanguard ETFs) I wasn't sure if these ITs offered a bit of equity selection diversification to the mainly passive global portfolio that I hold ? (eg HFEL top 10 holdings are different to VAPX ) ?

TimR