Interactive Investor

Discount Delver: the 10 cheapest trusts on 2 June 2023

2nd June 2023 11:19

by Kyle Caldwell 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.

Higher interest rates continue to negatively impact demand for adventurous strategies, causing investment trust discounts to widen.

Rate rises have triggered a re-pricing of risk assets, due to the fact that investors can now for the first time in over a decade obtain a decent level of income on low-risk assets – cash and bonds.

With yields of 4% and 5% available on cash and relatively low-risk bonds, there’s less appeal in trying to obtain bigger returns for much greater risk. In particular, investment trusts specialising in alternative assets that generate income have seen demand cool, such as Ecofin US Renewables Infrastructure (LSE:RNEW), which is trading on a discount of 23.5%.

Other adventurous strategies that have seen their discounts widen over the past week include Geiger Counter (LSE:GCL) and Syncona (LSE:SYNC). Both have posted sizeable losses year-to-date, -10.3% and -18.7%.

However, in stark contrast, the biggest discount mover over the past week has delivered eye-catching returns year-to-date. Manchester & London (LSE:MNL), which is a highly concentrated play on technology stocks, is up 32% in 2023. As at 2 May the trust held 29.8% in Microsoft Corp (NASDAQ:MSFT), so therefore it fortunes are heavily tied to how that one stock performs.

Lower down the trust's top holdings, in fifth place, is NVIDIA Corp (NASDAQ:NVDA), accounting for 7.3%. The firm’s share price soared at the end of last month as demand for Artificial Intelligence (AI) related chips across its data centre customers surged.  

However, performance over three and five years for Manchester & London is lacklustre, with losses of 22.7% and 0.5%, according to FE Fundinfo.

Investment trustSectorDiscount/premium change over past week* (%)Current discount (%)
Manchester & London (LSE:MNL)Global-9.60-21.51
Geiger Counter (LSE:GCL)Commodities & Natural Resources-7.80-16.58
Foresight Sustainable Forestry (LSE:FSF)Farmland & Forestry-6.70-4.76
Syncona (LSE:SYNC)Biotechnology & Healthcare-5.20-21.60
Taylor Maritime Investments (LSE:TMI)Leasing-4.10-40.44
Apax Global Alpha (LSE:APAX)Private Equity-4.00-28.99
Ecofin Global Utilities & Infrastructure (LSE:EGL)Infrastructure Securities-4.00-1.99
Ecofin US Renewables Infrastructure (LSE:RNEW)Renewable Energy Infrastructure-3.60-23.48
BlackRock Energy and Resources Inc (LSE:BERI)Commodities & Natural Resources-3.40-9.51
JPMorgan Multi-Asset Growth & Income (LSE:MATE)Flexible Investment-3.40-5.69

Source: Morningstar. *Data from close of trading 25 May 2023 to close of trading 1 June 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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