Interactive Investor

Discount Delver: the 10 cheapest trusts on 13 January 2023

13th January 2023 10:27

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.

Over the past week the leading performer in the global equity income trust sector over the past year has moved from a premium to a discount – Murray International (LSE:MYI) (see table below). The trust, a member of interactive investor’s Super 60 list, has been a beneficiary of the change in macroeconomic conditions, which has resulted in sentiment shifting away from high growth strategies. Over the past year it is up 15.5% versus 6.9% for the average global equity income trust. 

Murray International has a value focus, and a bias towards Asia and emerging makers.  This, along with having a higher dividend yield (4.3%) compared with most rivals, sets it apart from other offerings. The trust, managed by Bruce Stout, has raised its dividend for the past 17 years.

However, over five and 10 years it is behind peers. It has returned 28.2% and 91.1%, compared to 35.6% and 128.7% for the average global equity income trust.

Two sectors dominate this week’s table – renewable energy infrastructure and property. Both are facing the headwind of higher interest rates. As the return on cash increases, investors expect to earn more from other assets to compensate, which has reduced appeal for both renewable energy infrastructure and property.

In addition, property is an economically sensitive asset class. The expected recession for the UK economy is negatively impacting investor sentiment.

Discount Delver: the 10 biggest discount moves over the past week

Investment trustSectorDiscount/premium change over past week* (%)Current discount (%)
Murray International (LSE:MYI)Global Equity Income-6.32-4.50
Regional REIT (LSE:RGL)Property - UK Commercial-4.88-43.12
Triple Point Energy Transition (LSE:TENT)Renewable Energy Infrastructure-4.57-25.30
Ashoka India Equity Investment (LSE:AIE)India-4.09-5.60
Civitas Social Housing (LSE:CSH)Property - UK Residential-3.88-48.08
abrdn Japan Investment Trust (LSE:AJIT)Japan-3.68-14.73
SDCL Energy Efficiency Income (LSE:SEIT)Renewable Energy Infrastructure-3.59-8.62
HydrogenOne Capital Growth (LSE:HGEN)Renewable Energy Infrastructure-3.43-20.67
AVI Japan Opportunity (LSE:AJOT)Japanese Smaller Companies-3.33-1.03
Jupiter Green (LSE:JGC)Environmental-3.15-19.62

Source: Morningstar. *Data from close of trading 5 January 2023 to close of trading 12 January 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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