Stockbroking and advisory firm Oriel Securities looked at a universe of approximately 200 investment trusts which are members of the AIC, but stripped out private equity and property funds due to their irregular reporting practices and those leveraged in fixed income.
Oriel said a number of UK equity income specialist trusts were relatively highly geared at the end of September, a level they have tended to maintain throughout the recovery in the UK equity market over the past few years.
Merchants Investment Trust was the most highly leveraged trust looked at, with net leverage of 27% on 30 September, compared to 22% on 30 June.
Analyst Iain Scouller, said: "Merchants, which invests in FTSE 100 companies and pays a high dividend yield of 6% has 27% equity leverage. The board normally maintains a relatively high level of leverage in the Merchants portfolio.
"Edinburgh Investment Trust, which is managed by Neil Woodford at Invesco Perpetual, also tends to maintain a high level of leverage and this was 22% of NAV at the end of September."
Another fund with 22% gearing was Jupiter European Opportunities, which had increased its leverage from 15% at the end of June.
"Given that the ability to leverage is potentially a key ‘advantage’ for investment trusts and given the size of the trust universe, it appears that most boards and managers are currently using leverage fairly cautiously," Scouller said.
He explained that the AIC monthly data for the end of September included a number of other trusts with net leverage above 10%, but Oriel had not included these because they were invested in assets other than equities.
For example, Shires Income had net leverage of 30%, which is primarily invested in fixed income and British Assets showed net leverage of 23% also heavily skewed towards fixed income.
