Discount Delver: the 10 cheapest trusts on 18 August 2023

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. 

Infrastructure investment trusts saw the big discount moves over the past week, as rising bond yields put pressure on investment trusts whose objective is to provide an income to investors.  

Digital 9 Infrastructure moved from a 47% discount to a 53.8% discount, Triple Point Energy Transition went from 34.8% to 41.3%, Gore Street Energy Storage Fund moved from 18.3% to 24.8%, Pantheon Infrastructure went from 20.3% to 25.7%, while Renewables Infrastructure Group from 13.1% to 18.6%.  

• Top-performing fund, investment trust and ETF data: August 2023
• Benstead on Bonds: why interest rate cuts aren’t coming soon

Strong economic data and higher than expected inflation in the UK caused markets to bet that interest rates would be higher for longer in Britain. When returns from bonds rise, other income investments tend to fall as investors can lock in a yield from the bond market and do not have to stray into more complicated and expensive areas, such as renewable energy.  

The biggest discount move this week was from ICG-Longbow Senior Sec. UK Prop Debt Investments, which went from a 39.5% discount to a 48.2% discount. The trust owns real estate debt, including funding for offices, hotels and residential buildings.  

Other property-related trusts on this week’s Discount Delver list were Custodian Property Income REIT and Supermarket Income REIT, which dropped to 19.6% and 24.3% discounts respectively.  

Rounding off the discount list were private equity trust HgCapital Trust, where the discount dropped six percentage points to 20%, and energy investor Riverstone Energy, where the discount dropped eight percentage points to 55.3%. 

Source: Morningstar. *Data from close of trading 10 August 2023 to close of trading 17 August 2023.