Diverse Income Trust plc (LON:DIVI) has announced that its Factsheet for the month ended 31 October 2024 is now available:
Manager commentary
After such a long period of elevated interest rates, investors are now becoming concerned that governments will increase expenditure to offset an economic slowdown. In the UK for example, whilst the Budget did raise significant extra tax, the government is also planning to grow expenditure at an even faster rate.
During October, the valuation of government debt fell back considerably. Alongside, stock market returns have moderated over the summer, with the UK stock market indices performance falling very slightly in October. The trust’s Net Asset Value (NAV) produced a positive return this month, in part as the share prices of smaller companies have started to outperform. To date, UK pension savings have been inheritance tax free. During October, the Budget proposed that pension savings will be liable to 40% inheritance tax in future. Companies listed on the Alternative Investment Markets (AIM listed stocks) have also been inheritance tax free, but in their case, they will be liable to a reduced rate of 20%.
Currently, little additional pension savings are being invested in AIM listed stocks. With the Budget changes however, we believe pension investments in AIM listed stocks may now greatly increase. This is due to two reasons, one that we believe AIM stocks are overdue a period of better share price performance. Secondly, over the longer term, smaller companies typically outperform. Hence, in the coming years, we believe the pension saving flows into AIM stocks will increase due the lower inheritance tax liability. As the AIM investment universe is comparatively tiny in comparison to the major stock markets indices, such as the FTSE 100 Index, even modest increases in capital flows will, in our view, lead to AIM outperformance. We remain very upbeat about the prospects for the Trust.
Gervais Williams & Martin Turner 31.10.2024
Diverse Income Trust plc invests primarily in quoted or traded UK companies with a wide range of market capitalisations, but a long-term bias toward small and medium sized companies.
