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2016 to mid-2021 was a period characterised by historically low interest rates. Over this time, according to data from the AIC, investment trust boards across the three sectors we look at in this report seized the opportunity and locked in a total of £4.1bn of fixed-rate borrowings at low rates, fixed for a minimum of two years. With interest rates as low as they were, in hindsight it seems like a no-brainer. However, different trusts have different balance sheets and different circumstances. Employing long-term fixed-rate gearing is not necessarily for everyone, but given the significant rise in borrowing costs, we discuss what nuances investors, boards or managers of investment trusts now have to consider, and see whether higher costs of borrowing are actually having an impact on gearing levels in practice.
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