Time to gear?

As a horrid 2008 draws to a close, it would hardly come as a surprise that the focus of attention is what will happen in 2009. Will more bad news continue to keep global markets low? Are we close to a bottom and is a recovery in sight?

A recent poll of investment trust managers by the Association of Investment Companies revealed a wide range of opinion. More interestingly it also showed that just under half of managers plan to raise their trust’s gearing levels in the first half of 2009. Despite the uncertainty it seems fund managers believe investment opportunities will increase.

The old adage with gearing is that it can benefit investment trusts on the way up, but can severely hinder their progress on the way down. So the timing of raising gearing does seem questionable if, as many predict, the first half of 2009 is unlikely to yield much good news. On the back of this a wave of irrational selling of good companies from worried investors, could test the patience of managers who are ready to gear up for a recovery.