Discount Delver: the 10 cheapest trusts on 13 September 2024

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. 

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Three commodity-focused investment trusts made the Discount Delver list this week, as fears around economic growth hurt the shares of mining and oil companies.

CQS Natural Resources G&I moved from a -9.3% discount to a -13.3% discount and BlackRock World Mining moved from a -3.9% discount to a -8.4% discount. Geiger Counter, which owns companies involved in uranium as well as exchange-traded funds (ETFs) tracking the price of the commodity, dropped from a -11.9% discount to a -18.6% discount.

Investors are worried that higher interest rates are going to cause a recession, or economic slowdown, which would lead to less consumption of natural resources. This would lead to lower prices and therefore lower profits for firms in the sector.

The other sector to feature heavily on Discount Delver this week was Renewable Energy Infrastructure.

Four trusts made the list: Ecofin US Renewables Infrastructure, Gresham House Energy Storage, Aquila Energy Efficiency Trust and HydrogenOne Capital Growth.

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Generally, investment trusts investing in unlisted assets have seen their discounts rise over the past couple of years, linked to rising interest rates, which have put pressure on asset valuations, and particularly income-producing assets such as renewable energy infrastructure, such as solar and wind farms, or batteries.

However, the turning of the interest rate cycle, with the Bank of England already making its first rate cut, could lead to discounts narrowing.

Digital 9 Infrastructure, another trust which owns physical assets, also featured, with its discount rising from -54.2% to -58.5%.

Rounding off this week’s list were BioPharma Credit and Schiehallion Fund, now on discounts of -13.2% and -29.6%. 

Source: Morningstar. *Data from close of trading 5 September 2024 to close of trading 12 September 2024.