Discount Delver: the 10 cheapest trusts on 6 April 2023
6th April 2023 10:59
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.
With the Bank Holiday weekend looming, the data for this week’s table has been run a day earlier, so figures are for 29 March to 5 April.
The main trend over the past few weeks among the widest discount moves has not changed, with adventurous strategies dominating the table. This is due to investors becoming less willing to invest in higher-risk offerings when they can find respectable returns from lower-risk investments, such as cash and bonds. The rate of interest on cash and the income being offered by bonds has reached levels not seen for more than a decade. This is owing to interest rate rises that have taken place since the end of 2021 in an attempt to cool inflation.
Adventurous strategies in this week’s table include Ashoka India Equity Investment (LSE:AIE), Round Hill Music Royalty (LSE:RHM), Barings Emerging EMEA Opportunities (LSE:BEMO), and RTW Venture (LSE:RTW).
However, the biggest discount change over the past week was Regional REIT (LSE:RGL). The property portfolio, which invests wholly in the UK and predominately office space, published its annual results for 2022 at the end of last week. It reported a loss of 31.3%, which was slightly ahead of its benchmark decline of 31.9%.
In common with other property trusts and funds, Regional REIT is suffering from the impact of rising interest rates, which have lowered property valuations. In response to its results, the trust’s discount has widened, and is now standing at 36.7%.
While REITs are out of favour, there are reasons for optimism as our recent analysis of the sector argues.
Discount Delver: the 10 biggest discount moves over the past week
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| Regional REIT (LSE:RGL) | Property - UK Commercial | -7.60 | -36.74 |
| Ashoka India Equity Investment (LSE:AIE) | India | -5.00 | -4.25 |
| Aseana Properties (LSE:ASPL) | Property - Rest of World | -5.00 | -71.25 |
| Round Hill Music Royalty (LSE:RHM) | Royalties | -4.30 | -51.20 |
| Crystal Amber (LSE:CRS) | UK Smaller Companies | -4.20 | -37.19 |
| Barings Emerging EMEA Opportunities (LSE:BEMO) | Global Emerging Markets | -3.70 | -21.38 |
| Rockwood Strategic (LSE:RKW) | UK Smaller Companies | -3.50 | -7.89 |
| RTW Venture (LSE:RTW) | Biotechnology & Healthcare | -3.50 | -36.39 |
| ICG-Longbow Senior Sec. UK Prop Debt Inv (LSE:LBOW) | Property - Debt | -3.30 | -34.09 |
| Triple Point Energy Transition (LSE:TENT) | Renewable Energy Infrastructure | -3.10 | -38.41 |
Source: Morningstar. *Data from close of trading 29 March 2023 to close of trading 5 April 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.