Discount Delver: the 10 cheapest trusts on 3 March 2023
3rd March 2023 10:06
by Kyle Caldwell from interactive investor
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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.
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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.
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Many investment trusts are being negatively impacted by rising interest rates, which has led discounts to widen.
Among the 10 biggest movers of the past week, a common theme is that adventurous strategies are being given the cold shoulder by investors, who are being more cautious.
HydrogenOne Capital Growth (LSE:HGEN), which launched around 18 months ago, invests in hydrogen-focused assets. In theory, hydrogen has plenty of appeal as an investment theme as investors grow more concerned about climate change. It is a so-called clean fuel as, unlike oil and coal, it does not emit CO2 when consumed. However, shareholders who bought in at IPO on 30 July 2021 will have been disappointed, as the share price is down 36.8%.
Second in the table is Schiehallion Fund (LSE:MNTN), which invests in unlisted firms. As interest rates have risen there’s less appeal among investors for this type of strategy. Its discount has risen by seven percentage points to 32.2%.
The third biggest change is CQS Natural Resources G&I (LSE:CYN), which is now on an 18.7% discount. Two other commodity-focused trusts that are also in the top 10 table are Geiger Counter (LSE:GCL) and BlackRock Energy and Resources Income (LSE:BERI).
Discount Delver: the 10 biggest discount moves over the past week
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| HydrogenOne Capital Growth (LSE:HGEN) | Renewable Energy Infrastructure | -8.74 | -34.74 |
| Schiehallion Fund (LSE:MNTN) | Growth Capital | -7.60 | -32.19 |
| CQS Natural Resources G&I (LSE:CYN) | Commodities & Natural Resources | -4.96 | -18.70 |
| River and Mercantile UK Micro Cap (LSE:RMMC) | UK Smaller Companies | -4.57 | -19.35 |
| Pacific Assets (LSE:PAC) | Asia Pacific | -4.17 | -9.58 |
| Geiger Counter (LSE:GCL) | Commodities & Natural Resources | -3.63 | -12.41 |
| JPMorgan UK Smaller Companies (LSE:JMI) | UK Smaller Companies | -3.47 | -14.10 |
| Triple Point Social Housing REIT (LSE:SOHO) | Property - UK Residential | -3.44 | -54.63 |
| 3i Infrastructure (LSE:3IN) | Infrastructure | -2.97 | -3.04 |
| BlackRock Energy and Resources Income (LSE:BERI) | Commodities & Natural Resources | -2.62 | -2.94 |
Source: Morningstar. *Data from close of trading 23 February 2023 to close of trading 2 March 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.