Interactive Investor

Discount Delver: the 10 cheapest trusts on 17 March 2023

17th March 2023 11:19

by Sam Benstead 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 and those that are not available on the interactive investor platform. 

The largest discount move over the past week was in shares of HydrogenOne Capital Growth, an investment trust that buys companies, both listed and unlisted, that are involved in hydrogen power.  

It now trades at a 45% discount compared with a 38% discount one week ago. As interest rates rise, investors are being put off companies that promise profits tomorrow, and instead are preferring more mature businesses that make a lot of money today.  

The next largest discount move was in EJF Investments.  EJF invests in companies in the banking and investment sectors. Sentiment has deteriorated in these sectors due to the issues at small US banks, such as SVB Financial Group,  as well as Credit Suisse Group AG ADR.  As a result, EJF’s discount rose from 31% to 37% over the past week. 

The third-biggest discount move was in Apax Global Alpha,  which now trades at 29% discount. Investors are sceptical about resilient private company valuations when public markets are under intense pressure.  

Other affected private equity trusts on the Discount Delver list include HarbourVest Global Private Equity (5.1 percentage point discount move); Princess Private Equity (4.8 percentage point discount move); as well as Baillie Gifford US Growth (5 percentage point discount move), which can invest up to 50% of its portfolio in unlisted companies.  

Rounding off the Discount Delver list this week were: RTW Venture (5.2 percentage point discount move); Digital 9 Infrastructure (4.4 percentage point discount move); and Pantheon Infrastructure (4.3 percentage point discount move). 

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

Investment trustSectorDiscount change over past week* (%)Current discount (%)
HydrogenOne Capital GrowthRenewable Energy Infrastructure-7.45-45.27
EJF InvestmentsDebt - Structured Finance-6.69-37.26
Apax Global AlphaPrivate Equity-5.54-29.17
RTW VentureBiotechnology & Healthcare-5.22-23.89
HarbourVest Global Priv EquityPrivate Equity-5.09-48.49
Baillie Gifford US GrowthNorth America-4.96-21.98
Princess Private EquityPrivate Equity-4.82-36.55
Augmentum FintechTechnology & Media-4.77-40.90
Digital 9 InfrastructureInfrastructure-4.38-31.79
Pantheon InfrastructureInfrastructure-4.33-12.69

Source: Morningstar. *Data from close of trading 9 March 2023 to close of trading 16 March 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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