Discount Delver: the 10 cheapest trusts on 16 September 2022

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.

As part of a new weekly series, interactive investor is highlighting the 10 biggest investment trust discount moves over the past week. We will publish this article every Friday, using data up to the close of trading the previous day.

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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 biggest discount mover is Hipgnosis Songs (LSE:SONG), which is now trading on a discount of 28.4%. It offers investors a pure-play exposure to songs and associated intellectual property rights. Among the artists that have sold their music catalogues to Hipgnosis is Fleetwood Mac singer-songwiter Christine McVie.

Over the past year its share price is down 14.5%, with stock market volatility negatively hitting investor sentiment. As an alternative, investment music royalties are competing for capital against the more traditional alternative investments that are held in a portfolio – including commodities and infrastructure. However, during the risk-off environment musical royalties have not offered protection, whereas both commodities and infrastructure have made positive returns in 2022. The other music royalty trust – Round Hill Music Royalty (LSE:RHM)– is down 5.8% over the past year. Its discount is 14.3%. 

Chrysalis Investments Limited (LSE:CHRY ) once again features in our table. Its discount has widened further, now standing at 60.2%. The trust buys fledgling companies that might make it big, such as buy now, pay later firm Klarna and digital bank Starling.

Its shares rose from around £1.20 at the start of 2020 to a peak of £2.70 (3 September 2021) as investors rushed to own a slice of the future. However, with interest rates rising rapidly, its share price has plummeted to 64p, a drop of 76% from its peak.

Two other adventurous strategies that have seen their discounts widen over the past week are BlackRock Latin American (LSE:BRLA) and RTW Venture (LSE:RTW).

Independent (LSE:IIT), which is proposing to merge with Baillie Gifford-managed Monks (LSE:MNKS), has seen its small discount increase to 4.8%. The vote on the proposed merger expected to take place next month.

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

Source: Morningstar. *Data from close of trading 8 September 2022 to close of trading 15 September 2022. Past performance is not a guide to future performance.