This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
We think 2024 is starting with a new sense of optimism in the air, as the prospect of easing macroeconomic conditions is on the horizon. Last year was a difficult one for many investors, at least until the fourth-quarter rally. Rising interest rates created incentives to shift into cash, and this led to a significant widening of discounts on investment trusts. However, markets performed strongly at the end of the year. With expectations rising for rate cuts sooner rather than later, and any recessionary forces looking weak, the picture for financial assets is arguably brighter than it was last January.
Here we look at how investors responded to the uncertainty enveloping markets in 2023 by analysing the evolution of asset flows. We set out to see how open-ended fund flows compared to discount moves in the closed-ended universe, and where the sector stands. We think the analysis highlights some potential opportunities in cheap sectors.
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