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.
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Pressure on the alternatives investment trust sector, which includes property, private equity, renewable energy and infrastructure, receded this week.
Compared to last week, where nearly all (eight out of 10) trusts on the discount delver list were in the alternatives space, this week just four were: Premier Miton Global Renewables Trust, Aseana Properties, Ecofin Global Utilities & Infrastructure and Eurocastle Investment. Their discounts rose 14 percentage points, 6 percentage points, 5 percentage points and 5 percentage points respectively over the past week.
Interest rate rises have triggered a re-pricing of risk assets due to the fact that investors can, for the first time in more than a decade, obtain a decent level of income on low-risk assets such as cash and bonds.
With yields of 4% and 5% available on cash and relatively low-risk bonds, there’s less appeal in trying to obtain bigger returns for a higher amount of risk. As a result, discounts on investment trusts investing in alternative assets have been rising throughout 2023.
The rest of the list covered a wide range of sectors. They were income (abrdn Diversified Income & Growth and CT UK High Income), biotech (RTW Biotech Opportunities), and equities (Barings Emerging EMEA Opportunities, Artemis Alpha Trust and Manchester & London).
Overall, it was a subdued week for discount changes, with just Premier Miton Global Renewables Trust having a notable discount move.
|Trust||Sector||Current Discount (%)||Discount/premium change over past week* (percentage points)|
|Premier Miton Global Renewables Trust (LSE:PMGR)||Infrastructure Securities||-16.7||-14.2|
|RTW Biotech Opportunities (LSE:RTW)||Biotechnology & Healthcare||-30.4||-6.2|
|Aseana Properties (LSE:ASPL)||Property - Rest of World||-74.3||-5.7|
|Eurocastle Investment (EURONEXT:ECT)||Debt - Loans & Bonds||-26.8||-4.9|
|Ecofin Global Utilities & Infrastructure (LSE:EGL)||Infrastructure Securities||-16.9||-4.7|
|Artemis Alpha Trust (LSE:ATS)||UK All Companies||-15.1||-4.3|
|CT UK High Income||UK Equity Income||-6.3||-4.1|
|Manchester & London (LSE:MNL)||Global||-22.8||-3.7|
|abrdn Diversified Income & Growth (LSE:ADIG)||Flexible Investment||-31.3||-3.5|
|Barings Emerging EMEA Opportunities (LSE:BEMO)||Global Emerging Markets||-24.0||-3.5|
Source: Morningstar. *Data from close of trading 5 October 2023 to close of trading 12 October 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.