Discount Delver: the 10 cheapest trusts on 7 July 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.   

• Invest with ii: Invest in Investment Trusts | Top UK Shares | Interactive investor Offers

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 generating income outside the two mainstream asset classes, shares and bonds, continue to see their discounts widen in response to interest rate rises. 

Rate rises have triggered a re-pricing of risk assets due to the fact that investors can, for the first time in more than a decade, obtain a decent level of income on low-risk assets such as cash and bonds. 

• Top 10 most-popular investment trusts: June 2023
• Be cautious of ‘AI tech hype’ as seven US stocks dominate returns

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. 

This is increasing discounts at so-called alternatives trusts: Harmony Energy Income, now on a 15% discount, TR Property (12%) discount, Alternative Income Reit (25% discount) and BBGI Global Infrastructure (13% discount). 

However, HydrogenOne Capital Growth recorded the biggest discount move. Its discount rose from 36% to 43%, and is now well ahead of the average 26% discount over the past 12 months.  

The trust invests in companies involved in hydrogen power, both public and private. However, investors are sceptical about the unproven sector and are selling the trust’s shares as interest rate rise.  

• Scottish Mortgage: our latest thinking on AI, Elon Musk and China
• Fund Battle: Polar Capital Technology vs Allianz Technology

Other trusts featuring on this week’s Discount Delver list are income play TwentyFour Income (4.5 percentage point move), and JPMorgan Global Core Real Assets (4.2 percentage point move). 

Rights & Issues (6.5 percentage point move) and Foresight Sustainable Forestry (4.7 percentage point move) finish off this week’s top 10 biggest discount moves.  

Source: Morningstar. *Data from close of trading 29 June 2023 to close of trading 6 July  2023.