Discount Delver: the 10 cheapest trusts on 23 September 2022

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 discount 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. 

We’ve been running our discount screen for two months, and during that time every single week has included a variety of investment trust sectors.

However, this week one asset class dominates, property. Five sectors feature: UK commercial, UK residential, UK logistics, UK healthcare and Europe.  

Rising interest rates and fears of a recession have negatively impacted investment sentiment towards property-focused investments. For property investment trusts, share prices have fallen year-to-date and discounts have widened. Over the past week, this trend continued.

The three biggest discount movers over the past week were LXI REIT (LSE:LXI), Home REIT (LSE:HOME) and Residential Secure Income (LSE:RESI).

Logistic-focused property trusts have had another headwind to contend with. Such trusts have seen their share prices dip since late April on the back of Amazon.com Inc (NASDAQ:AMZN) saying that it was scaling back investment in its delivery network. The return to offices and rise in the cost of living is causing companies to cut warehouse space, prompting investors to review the sector. Three trusts from the sector that were among the biggest discount moves this week are Warehouse REIT (LSE:WHR), Tritax Big Box REIT (LSE:BBOX) and Urban Logistics REIT (LSE:SHED).

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A Real Estate Investment Trust (REIT) operates like an investment trust. It is a quoted company that owns and manages income-producing property, either commercial or residential. Examples of assets REITs hold include hotels, theme parks and retail sites.

REITs provide a way for investors to access commercial property assets without having to buy property directly. There are two types of Real Estate Investment Trust (REIT): those that operate as property trading companies and those that operate as funds. 

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

Source: Morningstar. *Data from close of trading 15 September 2022 to close of trading 22 September 2022. Past performance is not a guide to future performance.