Interactive Investor

Discount Delver: the 10 cheapest trusts on 23 February 2024

We reveal the biggest investment trust discount changes over the past week.

23rd February 2024 10:54

by Sam Benstead from interactive investor

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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. 

In total, eight investment trust sectors feature in this week’s Discount Delver list, with discount to net asset value (NAV) moves ranging from 12.3 percentage points to 3.7. 

Top of the list was Seraphim Space Investment Trust, where the discount moved from 38.9% to 51.2%. 

The trust, which owns a mix of private and public companies linked to the space industry, such as satellites, is a regular feature on the Discount Delver list.  

Shares are extremely volatile and sensitive to interest rate changes, as much of the portfolio is unprofitable. The discount is so wide because investors are expressing doubt that the NAV of the private companies would be the same if they were publicly traded. Unlisted firms make up around 90% of the portfolio.  

The second and third biggest discount changes were from Premier Miton Global Renewables Trust and Foresight Sustainable Forestry. Their discounts rose by 7.2 and 6.7 percentage points respectively.  

This is the second week in a row on the list for the Premier Miton trust, which is under pressure as bond yields rise. The trust yields around 7%. 

Changes to interest rate expectations are leading to price changes on renewable energy trusts that are bought by investors for their income. The sector is also particularly volatile as it is dependent on borrowing to buy new assets. 

The same is true for other investment trusts whose objective is income. If bond yields rise, then it makes alternative sources of income relatively less appealing.  

The yield on the 10-year gilt has risen from 3.75% to 4.1% over the past month or so. This has affected the share prices of other Discount Delver members, including Urban Logistics Reit (4.3 percentage point move), Ecofin Global Utilities & Infrastructure (4.7 point move) and Foresight Sustainable Forestry (6.7 point move). 

Listed equity trusts JPMorgan China Growth & Income and Invesco Select UK Equity saw discounts rise to 12.3% and 18.2% respectively, while property investors Schroder European Real Estate Investment Trust and Value and Indexed Property Income saw discounts move to 40.2% and 21%. Private equity also featured on the Discount Delver list this week, with Symphony International Holding seeing its discount to NAV move from 44.8% to 49%.  

TrustSectorCurrent discount (%)Change in discount* (%)
Seraphim Space Investment Trust Growth Capital-51.2-12.3
Premier Miton Global Renewables Trust Infrastructure Securities-16.2-7.2
Foresight Sustainable Forestry Farmland & Forestry-29.9-6.7
Invesco Select UK Equity UK Equity Income-18.2-5.7
Ecofin Global Utilities & InfrastructureInfrastructure Securities-19.9-4.7
JPMorgan China Growth & Income China / Greater China-12.3-4.3
Urban Logistics REIT Property - UK Logistics-26.4-4.3
Symphony International Holding Private Equity-49-4.2
Schroder European Real Estate Investment TrustProperty - Europe-40.2-3.7
Value and Indexed Property Income Property - UK Commercial-21

-3.7

Source: Morningstar. *Data from close of trading 15 February 2024 to close of trading 22 February 2024.

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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