Discount Delver: the 10 cheapest trusts on 4 August 2023
4th August 2023 12:18
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.
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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.
- Why these investment trust discounts are too cheap to ignore
- Andrew Pitts’ 10 adventurous investment trust tips: July 2023
- Andrew Pitts’ 10 conservative investment trust tips: July 2023
The rising interest rate environment, with UK rates reaching 5.25% this week, continues to be the dominant theme that’s causing investment trust discounts to widen.
This week, two commodity-focused investment trust entered our table: Geiger Counter (LSE:GCL) and Baker Steel Resources (LSE:BSRT). Both don’t pay a dividend, an approach that has become less attractive when money market funds and bonds are paying higher income in response to those rate rises.
In addition, investment trusts that do pay a dividend, but invest in alternative assets, have also seen their share prices come under pressure, in turn causing discounts to widen.
With yields of 4% and 5% available on cash and relatively low-risk bonds, there’s less appeal in trying to obtain bigger returns for a higher amount of risk.
As a result, infrastructure investment trusts have seen lower demand. Four feature in our table this week: Gore Street Energy Storage Fund (LSE:GSF), VH Glob Sustainable Energy Opportunities (LSE:GSEO), SDCL Energy Efficiency Income (LSE:SEIT) and Ecofin Global Utilities & Infrastructure (LSE:EGL).
| Investment trust | Sector | Current discount (%) | Discount/premium change over past week* (%) |
|---|---|---|---|
| Geiger Counter (LSE:GCL) | Commodities & Natural Resources | -18.74 | -5.00 |
| Gore Street Energy Storage Fund (LSE:GSF) | Renewable Energy Infrastructure | -17.45 | -4.70 |
| Global Opportunities Trust (LSE:GOT) | Flexible Investment | -17.55 | -4.20 |
| CQS New City High Yield (LSE:NCYF) | Debt - Loans & Bonds | -0.88 | -3.40 |
| VH Glob Sustainable Energy Opportunities (LSE:GSEO) | Renewable Energy Infrastructure | -25.05 | -3.10 |
| Baker Steel Resources (LSE:BSRT) | Commodities & Natural Resources | -42.05 | -3.00 |
| SDCL Energy Efficiency Income (LSE:SEIT) | Renewable Energy Infrastructure | -25.91 | -2.90 |
| Ecofin Global Utilities & Infrastructure (LSE:EGL) | Infrastructure Securities | -9.41 | -2.90 |
| Tetragon Financial (LSE:TFG) | Flexible Investment | -69.76 | -2.90 |
| Chrysalis Investments Limited (LSE:CHRY) | Growth Capital | -47.10 | -2.90 |
Source: Morningstar. *Data from close of trading 27 July 2023 to close of trading 3 August 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.