Interactive Investor

Discount Delver: the 10 cheapest trusts on 23 December 2022

23rd December 2022 10:31

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.

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.

Investment trust discounts have widened notably since the beginning of the year, rising from 1.5% to 13.8% for the average discount, according to analyst Winterflood.

The bear market that’s played out this year in response to high inflation, interest rate rises and geopolitical tensions, most notably Russia’s invasion of Ukraine, has been a big factor. The ability to gear (borrowing to invest) has also hindered both performance and investor sentiment. In a falling market, gearing magnifies losses, which is why funds have generally held up better than investment trusts in 2022.

Over the past week, discounts have widened across the board, reflected by 10 different sectors comprising our latest table.

The biggest mover is abrdn European Logistics Income (LSE:ASLI), which has seen its discount increase by over seven percentage points to 38.3%. It is followed by abrdn Latin American Income Fund (LSE:ALAI), which has moved from a 7.7% discount to 14.1%. The third biggest change is Aurora (LSE:ARR). A week ago, the UK trust, which has a value investing approach, was trading close to the value of its investments, the net asset value (NAV). It is now on a 5.3% discount.

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

Investment trustSectorDiscount/premium change over past week* (%)Current discount (%)
abrdn European Logistics Income (LSE:ASLI)Property - Europe-7.69-38.32
abrdn Latin American Income Fund (LSE:ALAI)Latin America-6.40-14.10
Aurora (LSE:ARR)UK All Companies-5.87-5.30
Balanced Commercial Property (LSE:BCPT)Property - UK Commercial-5.35-36.79
Nippon Active Value (LSE:NAVF)Japanese Smaller Companies-5.23-14.13
Gulf Investment Fund (LSE:GIF)Global Emerging Markets-5.13-0.94
Tritax Big Box (LSE:BBOX)Property - UK Logistics-4.93-42.35
The European Smaller Companies Trust (LSE:ESCT)European Smaller Companies-4.82-14.92
Warehouse REIT (LSE:WHR)Property - UK Logistics-4.81-30.99
Baillie Gifford US Growth (LSE:USA)North America-4.09-14.55

Source: Morningstar. *Data from close of trading 15 December 2022 to close of trading 22 December 2022. 

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.

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