Discount Delver: the 10 cheapest trusts on 27 January 2023
27th January 2023 10:28
by Sam Benstead 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.
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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 and those that are not available on the interactive investor platform.
Discounts widened in property investment trust over the past week, with Life Science REIT, Triple Point Social Housing REIT and Balanced Commercial Property all in the top 10.
Life Science REIT is now on a 34% discount, five percentage points larger than a week ago, while Balanced Commercial Property is on a 41% discount and Triple Point Social Housing REIT on a 56% discount.
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Property funds are out of favour due to higher interest rates, with the income they offer now less valuable in a world where bonds from the UK and US governments yield more than 3%.
The biggest discount move over the past week was Digital 9 Infrastructure, with the discount rising from 10% to 16%. Infrastructure, like property, competes with the bond market for income-seekers.
Scottish Mortgage investment trust, the giant growth investment vehicle from Baillie Gifford, also appeared on the Discount Delver list.
Its discount now sits at 12.5%, up from 9% a week ago. Growth stocks are also under pressure due to higher interest rates, and there are also concerns from investors that Scottish Mortgage’s 30% in private shares could be overvalued.
Discount Delver: the 10 biggest discount moves over the past week
| Investment trust | Sector | Change in discount (%)* | Current discount (%) |
|---|---|---|---|
| Digital 9 Infrastructure | Infrastructure | -6.07 | -16.37 |
| Life Science REIT | Property - UK Commercial | -5.08 | -34.24 |
| Invesco Select Global Equity Income | Global Equity Income | -3.91 | -10.34 |
| Geiger Counter | Commodities & Natural Resources | -3.61 | -10.84 |
| Scottish Mortgage | Global | -3.48 | -12.55 |
| Balanced Commercial Property | Property - UK Commercial | -3.27 | -40.95 |
| Baillie Gifford US Growth | North America | -3.15 | -18.27 |
| Aurora | UK All Companies | -2.89 | -8.69 |
| Triple Point Social Housing REIT | Property - UK Residential | -2.74 | -55.94 |
| Shires Income | UK Equity Income | -2.71 | -3.86 |
Source: Morningstar. *Data from close of trading 19 January 2023 to close of trading 26 January 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.