Thanks again for your insights, Tom. I’ve seen Volta riding high in the 10-year performance tables for a while now but never looked at it closely before. I was surprised to see just how poorly many of these funds did before the pandemic in an era, as you say, when rates were falling so much and you’d expect the wind to be at their back.

I was tempted to throw in a load more Pixies sub-headings: Broken Face, Gouge Away, I Bleed, and Where Is My Mind? might have been approriate here!

Before I go on, I suppose the debt ‘elephant in the room’ is that when interest rates have gone down for 35 years, it’s arguably hard to know if a manager has been skilful or just lucky.

I admit trusts like Volta are tantalising – perhaps if you were a specialist in this space (i.e. where many don’t understand it) then you could do very well.

Twenty Four AM always seem to have a good reputation (and a well-aligned boutique) though TFIF has stumbled in the past few years. Again I’m sure an expert would be able to explain how conditions have changed to make the strategy not work any more.

And the CQS High Yield Trust always seemed to have a decent reputation, though again I don’t really understand the ins and outs of high yield risk-wise.

And finally I was intrigued by Chenavari’s Toro. They had explosive results with their hedge fund strategies post-2009 – one of which was then put into a closed-end fund, but again I suspect once rates got to near zero in about 2016 meant the strategy didn’t work as well.

Another of their hedge strategies rocketed up in March 2020, so they appear an impressive outfit – again it’s a case of knowing which of their strategies is appropriate for each environment.

I am happy to let others allocate to debt funds on my behalf as appropriate e.g. through Capital Gearing Trust. Incidentally if you’ve read the latest CGT quarterly, Peter Spiller also discusses the issue of size and ITs.

p.s. I’ve been listening to the Pixies lately too…

Thanks Sephy, sounds like a good long-term move to me.

Yes J. I only touched on it in the article but most of these trusts seem to be pretty pricey, partly because they are quite small. The M&G one I mentioned seems to be one of the cheapest – most of the others are well over 1% withI some over 2%!

I suspect there will be a few other situations like UKML and HSWL where some folks make quick gains, but I lack the skills to spot them. There’s no need to play every game 🙂

I agree a lot of these debt investment trusts look unsustainable, particularly the trusts involved with leasing. I had a look at some of them last year as a way of maximizing the yield from my portfolio, but thought better of it. Like you said, I cannot get my head around them.

I decided on the equity investment trust route, with a selection of some quality global trusts. The starting yield maybe smaller, but if they can keep dividend increases up (hopefully above inflation). After a few years the total amount of dividend received as a percentage of the original investment should be well above these debt trusts. Plus the added benefit of a larger market cap, lower fees and a proven formula.