Discount Delver: the 10 cheapest trusts on 18 November 2022
18th November 2022 12:45
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.
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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.
Over the past week, discounts have widened for investment trusts investing in property, resulting in four entries to our table: Home REIT (LSE:HOME), Balanced Commercial Property (LSE:BCPT), UK Commercial Property REIT (LSE:UKCM), and Warehouse REIT Ord (LSE:WHR). Rising interest rates and the likelihood of a prolonged recession have negatively impacted investment sentiment towards bricks and mortar, given that property investments are economically sensitive.
On the whole, investor sentiment remains bleak, among both retail investors and the professionals. Figures from the Investment Association (IA) show that fund investors have withdrawn money in seven of the first eight months of 2022. Meanwhile, the latest monthly Bank of America survey shows that cash levels among fund managers are close to record highs, at 6.2%. This is well above the long-term average of 4.9%.Â
With investors in cautious mode, there’s less demand for investment trusts investing in higher-risk areas of the market. This is reflected by discounts widening over the past week for abrdn China Investment (LSE:ACIC), Rockwood Strategic (LSE:RKW), and JPMorgan Japanese (LSE:JFJ).
Discount Delver: the 10 biggest discount moves over the past weekÂ
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| Home REITÂ (LSE:HOME) | Property - UK Residential | -8.02 | -34.43 |
| Balanced Commercial Property (LSE:BCPT) | Property - UK Commercial | -7.02 | -39.26 |
| UK Commercial Property REIT (LSE:UKCM) | Property - UK Commercial | -6.62 | -41.35 |
| Castelnau Group (LSE:CGL) | Flexible Investment | -5.62 | -12.00 |
| BlackRock Energy and Resources Income (LSE:BERI) | Commodities & Natural Resources | -5.46 | -7.03 |
| abrdn China Investment (LSE:ACIC) | China / Greater China | -4.93 | -16.37 |
| Octopus Renewables Infrastructure (LSE:ORIT) | Renewable Energy Infrastructure | -4.93 | -3.25 |
| Warehouse REIT (LSE:WHR) | Property - UK Logistics | -4.79 | -24.74 |
| Rockwood Strategic (LSE:RKW) | UK Smaller Companies | -4.10 | -6.27 |
| JPMorgan Japanese (LSE:JFJ) | Japan | -3.97 | -5.19 |
Source: Morningstar. *Data from close of trading 10Â November 2022 to close of trading 17Â November 2022.Â
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.