Interactive Investor

Discount Delver: the 10 cheapest trusts on 31 May 2024

We reveal the biggest investment trust discount changes over the past week.

31st May 2024 11:51

by Kyle Caldwell from interactive investor

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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 and those that are not available on the interactive investor platform. 

Investment trusts trading on premiums (share prices higher than the value of the investments in the portfolio) are few and far between at the moment, due to overall weak investor sentiment towards closed-ended funds.

Over the past week, two trusts that were trading on small premiums have moved to small discounts: Invesco Bond Income Plus (LSE:BIPS) and Odyssean Investment Trust (LSE:OIT). Investment trust premiums reflect more buyers than sellers. There are various drivers, including when an investment trust is performing very well, or if an attractive level of income is offered.

It is generally not a good idea to buy a trust on a high premium, say 5% or higher, because it tends not to be sustainable over the long term and can turn into a discount when conditions change.

Topping the table this week after its discount widened by nearly six percentage points is Manchester & London (LSE:MNL). It is a very concentrated portfolio, with its top two holdings, NVIDIA (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT), accounting for more than half its assets.

The biggest discount in the top 10, at -48.2%, is Schroders Capital Global Innovation Trust (LSE:INOV). Formerly Woodford Patient Capital, it was taken over by Schroders in December 2019, and the mandate was expanded a couple of years ago so the trust could invest in early stage global companies. Previously, it just held UK firms. Performance has been lacklustre, with losses of -19.2% and -66.4% over one and three-year periods.

Investment trust Sector Current discount (%)Discount/premium change over past week* (%)
Manchester & London (LSE:MNL)Global-19.74-5.74
CC Japan Income & Growth (LSE:CCJI)Japan-9.19-4.56
Oryx International Growth (LSE:OIG)UK Smaller Companies-26.35-4.36
Tritax EuroBox Euro (LSE:BOXE)Property - Europe-32.72-4.34
Invesco Bond Income Plus (LSE:BIPS)Debt - Loans & Bonds-1.97-3.92
JPMorgan Global Core Real Assets (LSE:JARA)Flexible Investment-16.29-3.28
Odyssean Investment Trust (LSE:OIT)UK Smaller Companies-1.30-3.03
Schroders Capital Global Innovation Trust (LSE:INOV)Growth Capital-48.21-2.88
Nippon Active Value (LSE:NAVF)Japanese Smaller Companies-6.15-2.86
CT UK High Income (LSE:CHI)UK Equity Income-6.06-2.84

Source: Morningstar. *Data from close of trading 23 May 2024 to close of trading 30 May 2024.

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.

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