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 and those that are not available on the interactive investor platform.
Property trust discounts widened over the past week, as investors punished sectors that are vulnerable to higher interest rates. Property portfolios are often debt-funded, so rising borrowing costs is negative for the sector. They also compete with bonds as income investments, so their value can fall when investors can get a better income from the bond market.
Markets are now betting that the Bank of England will have to raise interest rates above 5.5% to bring down inflation. Data released this week showed that average private sector wages rose 7.5% in the year to April, spooking investors and pushing up bond yields.
- Bond Watch: gilt yields surpass ‘mini-budget’ crisis
- Bonds vs equities: where should income-seekers turn?
Eight of the 10 biggest discount moves this week were in property investment trusts.
The biggest move in this sector was Target Healthcare REIT, whose discount increased from 17% to 32%.
The other movers were CT Property Trust (5.6 percentage point move); abrdn European Logistics Income (5.5 percentage point move); Impact Healthcare REIT (5 percentage point move); Supermarket Income REIT (5 percentage point move); LXI REIT (4.5 percentage point move); UK Commercial Property REIT (4.5 percentage point move), and Balanced Commercial Property (4.5 percentage point move).
However, the biggest discount move last week was Crystal Amber, a smaller UK companies trust. Its discount moved from 22% to 48% due to its troubled investment in passport and bank note maker De La Rue, whose shares are down 93% in the past five years.
Rounding off this week’s Discount Delver list is Pantheon Infrastructure, moving from a 11.5% discount to 16.5% discount. Like property, infrastructure is regarded as “bond proxy” asset class, whose primary goal is to give investors a steady income.
|Investment trust||Sector||Discount change over the past week* (%)||Current discount (%)|
|Crystal Amber||UK Smaller Companies||-21.10||-48.28|
|Target Healthcare REIT||Property - UK Healthcare||-10.32||-32.62|
|CT Property Trust||Property - UK Commercial||-5.59||-17.52|
|abrdn European Logistics Income||Property - Europe||-5.48||-26.72|
|Impact Healthcare REIT||Property - UK Healthcare||-4.93||-16.89|
|Supermarket Income REIT||Property - UK Commercial||-4.86||-19.66|
|LXI REIT||Property - UK Commercial||-4.55||-20.57|
|UK Commercial Property REIT||Property - UK Commercial||-4.49||-33.01|
|Balanced Commercial Property||Property - UK Commercial||-4.47||-36.09|
Source: Morningstar. *Data from close of trading 9 June 2023 to close of trading 15 June 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.