Discount Delver: the 10 cheapest trusts on 3 February 2023

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.

Baillie Gifford’s private company investment trusts had the biggest discount moves this week, with Schiehallion Fund and Schiehallion C registering 8.5 and 7 percentage point discount moves.

The trusts are now on 24% and 37% discounts due to investor pessimism around growth stocks, as well as doubts about the true value of private companies when public shares have fallen sharply in value.

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A ‘C’ share issue is one of the ways investment trusts issue new shares. The new shares are separately quoted and have their own NAV. One of the main benefits is that existing shareholders do not suffer any dilution if they do not invest in the new shares.

At some point, the C (conversion) shares will combine with the main share class. In Schiehallion’s case, this will take place once 85% of the new money raised is invested, or three years have passed since the listing date of the C shares, which was 26 April 2021.

India trusts also appeared on this week’s Discount Delver list. India Capital Growth and Aberdeen New India saw roughly 4 percentage point changes to their discounts, as a short seller report provoked a collapse of shares linked to Indian industrial conglomerate Adani, which affected sentiment towards Indian shares more broadly.

The trust with the biggest current discount on the list is Schroder UK Public Private Trust, which is the renamed and repurposed Woodford Patient Capital trust. It is on a 51.5% discount, which is 4 percentage points larger than a week ago.

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

Source: Morningstar. *Data from close of trading 26 January 2023 to close of trading 2 February 2023.