Discount Delver: the 10 cheapest trusts on 9 December 2022
9th December 2022 10:10
by Sam Benstead 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.
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.
The investment trust charged with looking after the wealth of the Rothschild banking dynasty – RIT Capital Partners – had the biggest discount change over the past week, moving 9.5 percentage points to a 16% discount.
The shares fell 6% this week despite global shares being relatively stable. The current discount is well above its 12-month average of 1.5%.
RIT Capital Partners is a mixed-asset portfolio, with free rein to invest anywhere in the world. As of the end of October, it had 31% invested in private market funds, 24% in hedge funds, 21% in equities and 14% in direct private stocks.
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With nearly half the portfolio in private companies, the discount has widened this year. Investors are betting that the stated net asset value of private companies, which are calculated by specialist firms because the companies are not traded on stock exchanges, are too generous.
HarbourVest Global Private Equity also appears on the Discount Delver list this week, with a 4 percentage point discount increase, taking it to a 47% discount. As does HgCapital Trust, with a 3.5 point move in its discount to 20%.
The next biggest discount change was Pollen Street, moving 7 percentage points to a 43% discount, followed by Caledonia Investments.
Compared with last week, where property trusts dominated the Discount Delver list with four out of 10 entries, there is a wide spread of investment trust sectors.
These include hedge funds, commodity and natural resources trusts, as well as private equity and European smaller companies.
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| RIT Capital Partners | Flexible Investment | -9.50 | -15.91 |
| Pollen Street | Debt - Direct Lending | -7.16 | -43.34 |
| Caledonia Investments | Flexible Investment | -6.00 | -26.87 |
| Riverstone Energy | Commodities & Natural Resources | -5.20 | -50.46 |
| UIL Limited | Flexible Investment | -4.33 | -31.72 |
| JPMorgan European Discovery | European Smaller Companies | -4.27 | -13.61 |
| Ediston Property Investment Company | Property - UK Commercial | -4.00 | -36.36 |
| HarbourVest Global Private Equity | Private Equity | -3.88 | -47.07 |
| Digital 9 Infrastructure | Infrastructure | -3.67 | -19.90 |
| HgCapital Trust Ord | Private Equity | -3.58 | -20.70 |
Source: Morningstar. Data from close of trading 1 December 2022 to close of trading 8 November 2022.
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.