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.
Infrastructure investment trusts saw the big discount moves over the past week, as rising bond yields put pressure on investment trusts whose objective is to provide an income to investors.
Digital 9 Infrastructure moved from a 47% discount to a 53.8% discount, Triple Point Energy Transition went from 34.8% to 41.3%, Gore Street Energy Storage Fund moved from 18.3% to 24.8%, Pantheon Infrastructure went from 20.3% to 25.7%, while Renewables Infrastructure Group from 13.1% to 18.6%.
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Strong economic data and higher than expected inflation in the UK caused markets to bet that interest rates would be higher for longer in Britain. When returns from bonds rise, other income investments tend to fall as investors can lock in a yield from the bond market and do not have to stray into more complicated and expensive areas, such as renewable energy.
The biggest discount move this week was from ICG-Longbow Senior Sec. UK Prop Debt Investments, which went from a 39.5% discount to a 48.2% discount. The trust owns real estate debt, including funding for offices, hotels and residential buildings.
Rounding off the discount list were private equity trust HgCapital Trust, where the discount dropped six percentage points to 20%, and energy investor Riverstone Energy, where the discount dropped eight percentage points to 55.3%.
|Investment trust||Sector||Current discount (%)||Change in discount (percentage points)*|
|ICG-Longbow Senior Sec. UK Prop Debt Investments||Property - Debt||-48.19||-8.69|
|Riverstone Energy||Commodities & Natural Resources||-55.27||-7.69|
|Digital 9 Infrastructure||Infrastructure||-53.85||-6.66|
|Triple Point Energy Transition||Renewable Energy Infrastructure||-41.34||-6.56|
|Gore Street Energy Storage Fund||Renewable Energy Infrastructure||-24.80||-6.55|
|Custodian Property Income REIT||Property - UK Commercial||-19.57||-6.07|
|HgCapital Trust||Private Equity||-19.15||-5.89|
|Renewables Infrastructure Group||Renewable Energy Infrastructure||-18.56||-5.42|
|Supermarket Income REIT||Property - UK Commercial||-24.29||-5.19|
Source: Morningstar. *Data from close of trading 10 August 2023 to close of trading 17 August 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.