Discount Delver: the 10 cheapest trusts on 14 October 2022
14th October 2022 12:39
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.
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.
- Explore our: Free regular investing | Top Investment Trusts | Transferring an Investment Account
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.Â
As our separate Bargain Hunter column explained earlier this week, investment trust discounts have widened notably since the beginning of the year, rising from 1.5% to 15.7% for the average discount. Given so many trusts are trading on big discounts it is important to delve deeper. With this in mind, our latest column screened the universe to identify the investment trusts trading at or close to their biggest discount over the past five years. In total, 12 investment trusts were identified.
In terms of discount moves over the past week, two trusts are no longer trading on premiums, in other words more than the sum of their parts: Thomas Lloyd Energy Impact Trust (LSE:TLEI) and Ecofin Global Utilities & Infrastructure (LSE:EGL).
Infrastructure trusts are seeing their discounts widen due to rising UK government bond (gilt) yields, which impact how investors value the expected income on offer.
Property strategies are also being negatively impacted by the same trend. Over the past week, Target Healthcare REIT (LSE:THRL) and Real Estate Credit Investments (LSE:RECI) have both seen their discounts widen notably.
Separately this week, reports that the government will introduce a cap on revenues for renewable energy companies sent shares of investment trusts in the sector sharply lower.Â
Discount Delver: the 10 biggest discount moves over the past weekÂ
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| Thomas Lloyd Energy Impact Trust (LSE:TLEI) | Renewable Energy Infrastructure | -15.16 | -9.80 |
| Baker Steel Resources (LSE:BSRT) | Commodities & Natural Resources | -13.06 | -46.52 |
| Pantheon Infrastructure (LSE:PINT) | Infrastructure | -12.76 | -11.36 |
| Target Healthcare REITÂ (LSE:THRL) | Property - UK Healthcare | -12.11 | -32.71 |
| Octopus Renewables Infrastructure (LSE:ORIT) | Renewable Energy Infrastructure | -10.06 | -16.37 |
| Schiehallion CÂ (LSE:MNTC) | Growth Capital | -9.87 | -40.77 |
| Schiehallion Fund (LSE:MNTN) | Growth Capital | -9.74 | -12.32 |
| Real Estate Credit Investments (LSE:RECI) | Property - Debt | -9.56 | -18.31 |
| Ecofin Global Utilities & Infrastructure (LSE:EGL) | Infrastructure Securities | -9.54 | -5.91 |
| GCP Asset Backed Income (LSE:GABI) | Debt - Direct Lending | -9.22 | -28.30 |
Source: Morningstar. *Data from close of trading 6 October 2022 to close of trading 13 October 2022. Past performance is not a guide to future performance.
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â 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.