Discount Delver: the 10 cheapest trusts on 25 November 2022
25th November 2022 11:43
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.
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.
Over the past week, there have been notable increases in discounts for two investment trusts on the back of sizeable share price moves.
Topping the Discount Delver table is Digital 9 Infrastructure (LSE:DGI9). As the name suggests, it invests in physical assets that make modern communications and commerce possible, a sector that includes data centres, mobile phone masts and subsea cables. The trust listed last April.
This week its share price was rocked, falling nearly 16%, by the departure of two fund managers, Thor Johnsen and Andre Karihaloo. As a result, its discount widened from 5.5% to 19.9%.
In response, investment trust analyst Investec issued a sell recommendation. It said: “We believe this development now leaves D9 in a perilous position given material uncertainty over the long-term management of the vehicle and its current over-leveraged position.”
The other big mover is Home REIT (LSE:HOME), which listed in October 2020. The trust invests in accommodation for homeless people across the UK. This week its share price fell notably, down 23%, following a report from short seller Viceroy Research, which made allegations about its financial stability. The report alleged that many of the tenants Home REIT works with “cannot afford rent, have not been paying rent, are in administration, are run by bad actors, or simply do not provide social housing services”.
Home REIT described the report as “inaccurate and misleading”. It added that the report was published “without any engagement with the company’s board, investment adviser, or wider advisory team”. Home REIT said it was based on “mistaken assumptions, misinformed comments, and disputable allegations”.
As a result of the share price slump, Home REIT’s discount to its NAV over the past week has increased by 10 percentage points to 44.5%.
Discount Delver: the 10 biggest discount moves over the past week
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| Digital 9 Infrastructure (LSE:DGI9) | Infrastructure | -14.43 | -19.91 |
| Home REIT (LSE:HOME) | Property - UK Residential | -10.05 | -44.49 |
| NB Distressed Debt Inv Extended Life | Debt - Loans & Bonds | -7.31 | -53.10 |
| Crystal Amber (LSE:CRS) | UK Smaller Companies | -5.26 | -20.99 |
| Schroder European Real Estate Investment Trust (LSE:SERE) | Property - Europe | -5.06 | -33.99 |
| Petershill Partners (LSE:PHLL) | Growth Capital | -4.63 | -48.59 |
| RTW Venture (LSE:RTW) | Biotechnology & Healthcare | -3.79 | -28.62 |
| NB Distressed Debt New Global | Debt - Loans & Bonds | -3.10 | -41.17 |
| VH Glob Sustainable Energy Opportunities (LSE:GSEO) | Renewable Energy Infrastructure | -2.99 | -8.51 |
| Montanaro UK Smaller Companies (LSE:MTU) | UK Smaller Companies | -2.90 | -6.69 |
Source: Morningstar. *Data from close of trading 17 November 2022 to close of trading 24 November 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.
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.