Discount Delver: the 10 cheapest trusts on 28 October 2022

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 a number of trusts that invest in an adventurous manner, including a lesser-known Baillie Gifford trust and several private debt funds.

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The biggest weekly discount change came from Schiehallion, the private company trust from Edinburgh-based growth manager Baillie Gifford.

A week ago its 'C' share class had a discount of 28%, but now trades at a 38.5% discount. The trusts own racy technology stocks, including SpaceX and Stripe, which have been under a lot of pressure this year as interest rates have risen.  

Its main share class – Schiehallion – has also seen its discount widen, but not as much as the ‘C’ share class. Over the past week, the discount has moved from 17% to 23.6%. Investors have reacted to turbulent markets by driving the Schiehallion discount wider because they are sceptical of the relatively resilient valuations of private companies compared with listed peers.

A ‘C’ share issue is one of the ways investment trusts issue new shares. The new shares are separately quoted and have their own NAV. One of the main benefits is that existing shareholders do not suffer any dilution if they do not invest in the new shares.

At some point, the C (conversion) shares will combine with the main share class. In Schiehallion’s case, this will take place once 85% of the new money raised is invested, or three years have passed since the listing date of the C shares, which was 26 April 2021.

Elsewhere, discounts grew on debt funds, which are sensitive to the health of the economy as they often issue loans to less financially secure borrowers.

These include Marble Point Loan Financing, now on a 1.6% discount compared with a 5% premium a week ago, and both SME Credit Realisation Fund and Riverstone Credit Opportunities Income, with four percentage point changes in the discount.

Other big discount moves came from Henderson Opportunities (5 percentage points move); Round Hill Music Royalty (4.5 percentage points move); CT Global Managed Portfolio Growth (4 percentage points move); CT UK High Income (4 percentage points move); and JPMorgan Russian Securities (4 percentage points move). 

Source: Morningstar. *Data from close of trading 19 October 2022 to close of trading 26 October 2022. Past performance is not a guide to future performance.