Interactive Investor

Discount Delver: the 10 cheapest trusts on 1 September 2023

1st September 2023 12:39

by Kyle Caldwell from interactive investor

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We reveal the biggest investment trust discount changes over the past week.  

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Investment trusts, due to their closed-ended structure, offer investors the chance of picking up a potential bargain. Such an opportunity arises when a trust’s share price is lower than the underlying investments held by the trust (the net asset value, or NAV).  

However, a trust trading on a discount to NAV is not necessarily a buying opportunity. There’s likely a good reason why the trust is cheap, such as subdued short- or long-term performance, or poor investor sentiment towards how it invests.  

In our weekly series, interactive investor highlights the 10 biggest investment trust discount moves over the past week. We publish this article every Friday, using data up to the close of trading the previous day.  

In total, nearly 400 investment trusts have been screened, with the data sourced from Morningstar. Venture Capital Trusts (VCTs) have been excluded. We also strip out trusts with less than £20 million in assets and those that are not available on the interactive investor platform.

At the moment it is rare to see an investment trust trading on a premium, but one company that’s been bucking the trend is Odyssean Investment Trust (LSE:OIT).

It has been trading on a premium on the back of some very impressive performance. Over three and five years it has notably outpaced the average UK smaller company trust. It has gained 54.5% and 46.6% over those timeframes versus 15.5% and 0.4% for the typical rival in its sector.

However, over the past year its performance has lagged, down 9.9% against a loss of 2.6% for the sector. Performance coming off the boil over that short time period has coincided with the trust slipping onto a very small discount over the past week. It is managed by Stuart Widdowson, who owns a small number (less than 20 stocks) of companies that he believes are mispriced and due a recovery.

Elsewhere, investment trusts providing exposure to unlisted companies continue to see their discounts widen. Such trusts are experiencing less demand due to higher interest rates, which has boosted the income returns on lower-risk assets, such as cash and bonds.

Featuring in our table this week are Literacy Capital (LSE:BOOK), Schiehallion Fund (LSE:MNTN), Dunedin Enterprise (LSE:DNE) and Schiehallion C (LSE:MNTC).

The latter is a ‘C’ share issue, which is one of the ways investment trusts issue new shares. At some point, the C (conversion) shares will combine with the main share class. In Schiehallion’s case, this will take place once 85% of the new money raised is invested, or three years have passed since the listing date of the C shares, which was 26 April 2021.

And finally, as was the case in our previous Discount Delver article trusts that provide debt financing have also been seeing their discounts widen. Blackstone Loan Financing Limited (LSE:BGLF) features in the table for the second week in a row.

Investment trust Sector Current discount (%)Discount/premium change over past week* (%)
Literacy Capital (LSE:BOOK)Private Equity-3.79-8.60
Schiehallion Fund (LSE:MNTN)Growth Capital-44.54-5.20
Odyssean Investment Trust (LSE:OIT)UK Smaller Companies-0.60-5.00
Aberforth Split Level Income (LSE:ASIT)UK Smaller Companies-7.10-4.20
Alpha Real Trust (LSE:ARTL)Property - Debt-44.33-3.50
Dunedin Enterprise (LSE:DNE)Private Equity-13.81-3.30
Blackstone Loan Financing Limited (LSE:BGLF)Debt - Structured Finance-34.72-2.90
Schiehallion C (LSE:MNTC)Growth Capital-45.35-2.80
Custodian Property Income REIT (LSE:CREI)Property - UK Commercial-20.43-2.50
CT UK High Income (LSE:CHI)UK Equity Income-8.80-2.40

Source: Morningstar. *Data from close of trading 24 August 2023 to close of trading 31 August 2023.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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