Discount Delver: the 10 cheapest trusts on 19 August 2022

In the latest article in our new series, 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 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. 

This week, the biggest mover is Baillie Gifford-managed Schiehallion C (LSE:MNTC), which has moved from a small premium to a small discount. The trust seeks to find tomorrow’s potential ‘unicorns’ before IPO. The ‘C’ shares are now on a discount, whereas the main share class is trading on a premium of 7.4%.

A ‘C’ share issue is one of the ways investment trusts issue new shares. The new shares are separately quoted and have their own NAV. One of the main benefits is that existing shareholders do not suffer any dilution if they do not invest in the new shares.

At some point, the C (conversion) shares will combine with the main share class. In Schiehallion’s case, this will take place once 85% of the new money raised is invested, or three years have passed since the listing date of the C shares, which was 26 April 2021.

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Another trust from the Growth Capital sector has entered this week’s table: Chrysalis Investments Limited (LSE:CHRY) The trust is sitting on an enormous discount of 59.2%. 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 87p, a drop of 68% from its peak.

Of the other eight trusts, there’s no other sector correlation. Private equity investor HgCapital Trust (LSE:HGT) is the second-biggest discount mover, followed by property trust Triple Point Social Housing REIT (LSE:SOHO).

The Bill Ackman-managed Pershing Square Holdings (LSE:PSH) is among the biggest movers of the past week, now on a discount of 35%. Over the long term, the trust has comfortably outpaced  the S&P 500 index of America’s largest companies.

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

Source: Morningstar. *Data from close of trading 11 August 2022 to close of trading 18 August 2022.