Interactive Investor

Discount Delver: the 10 cheapest trusts on 16 December 2022

16th December 2022 10:35

Kyle Caldwell from interactive investor

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

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.

Home REIT (LSE:HOME) returned to the table this week, having seen its discount increase by seven percentage points to 67.2%.

The trust has experienced notable changes in its share price and discount since a short seller report was published on 23 November. Since then, the shares are down around 40%.

Short seller Viceroy Research made allegations about the financial stability of the underlying assets of Home REIT, which invests in accommodation for homeless people across the UK. A full response was issued by Home REIT on 30 November in which it called Viceroy Research’s allegations “baseless and misleading”. It addressed five key allegations made by the short seller, including financial stability.

The only other trust that saw its discount move wider this week was Schiehallion C (LSE:MNTC). It owns racy technology stocks, including SpaceX and Stripe, which have been under a lot of pressure this year as interest rates rose.  

Overall, most of the Discount Delver table is comprised of investment trusts that invest adventurously. When investors are cautious – such as at the moment – these trusts see less investor demand, causing discounts to widen.

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

Investment trustSectorDiscount/premium change over past week* (%)Current discount (%)
Schiehallion C (LSE:MNTC)Growth Capital-7.56-34.50
Home REIT (LSE:HOME)Property - UK Residential-7.28-67.21
CC Japan Income & Growth (LSE:CCJI)Japan-5.57-10.89
Barings Emerging EMEA Opportunities (LSE:BEMO)Global Emerging Markets-5.20-18.20
Pollen Street (LSE:POLN)Debt - Direct Lending-4.59-47.93
Castelnau Group (LSE:CGL)Flexible Investment-3.98-8.54
Triple Point Social Housing REIT (LSE:SOHO)Property - UK Residential-3.76-41.29
JPMorgan Global Core Real Assets (LSE:JARA)Flexible Investment-3.63-15.22
abrdn Japan Investment Trust (LSE:AJIT)Japan-3.62-14.06
Geiger Counter (LSE:GCL)Commodities & Natural Resources-3.40-6.01

Source: Morningstar. *Data from close of trading 8 December 2022 to close of trading 15 December 2022. 

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.

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