Discount Delver: the 10 cheapest trusts on 19 May 2023
19th May 2023 11:39
by Kyle Caldwell from interactive investor
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.
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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.
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Over the past week, three investment trusts have moved from small premiums to small discounts, namely M&G Credit Income Investment (LSE:MGCI), Chelverton UK Dividend Trust (LSE:SDV) and Weiss Korea Opportunity (LSE:WKOF). With most investment trusts trading on discounts, investors are less willing to pay more for something than it is technically worth.
The biggest discount mover over the past week is the UK real estate debt investor ICG-Longbow Senior Sec. UK Prop Debt Inv (LSE:LBOW). Two years ago, shareholders approved a change in the investment objective of the company, which is now to conduct an orderly realisation of its assets.
US Solar Fund (LSE:USF) is in second place in the table. Its discount has jumped by nearly six percentage points over the past week to 22.8% in response to an update on its lengthy strategic review process. Last October, it said it intended to sell some or all of its assets. In an update on 12 May, it revealed it rejected an offer for the trust’s assets, and with no other bids on the table its shareholders are in limbo over its future.
Our columnist Ian Cowie this week explained why he has been disappointed with how performance has fared for US Solar Fund since he purchased it for his ‘forever fund’.
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| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| ICG-Longbow Senior Sec. UK Prop Debt Inv | Property - Debt | -7.00 | -40.30 |
| US Solar Fund | Renewable Energy Infrastructure | -5.90 | -22.82 |
| M&G Credit Income Investment | Debt - Loans & Bonds | -4.80 | -3.73 |
| Majedie Investments | Flexible Investment | -4.00 | -16.95 |
| Chelverton UK Dividend Trust | UK Equity Income | -3.80 | -1.20 |
| Weiss Korea Opportunity | Country Specialist | -3.20 | -0.51 |
| Apax Global Alpha | Private Equity | -3.20 | -23.74 |
| GCP Asset Backed Income | Debt - Direct Lending | -3.00 | -25.12 |
| Greencoat UK Wind | Renewable Energy Infrastructure | -3.00 | -7.66 |
| Golden Prospect Precious Metal | Commodities & Natural Resources | -2.90 | -15.16 |
Source: Morningstar. *Data from close of trading 11 May 2023 to close of trading 18 May 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.