Discount Delver: the 10 cheapest trusts on 30 August 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 private equity investment trusts appear in this week’s table. Two are on wide discounts in the mid-thirties: HarbourVest Global Private Equity (LSE:HVPE) and ICG Enterprise Trust (LSE:ICGT). This is a reflection of negative investor sentiment towards the private equity sector over the past couple of years, amid concerns over whether the valuations for unlisted companies re-priced sufficiently to take into account higher interest rates.

As a result, most private equity trusts are trading on deep discounts, which may attract bargain hunters due to the long-term arguments for the sector remaining robust.

Many companies are staying private for longer, giving private equity investors a broader opportunity set. In addition, there are fast-growing companies in private markets that have no equivalent in the public markets.

Third, over the long term, the private equity trust sector has been a solid performer overall. To emphasise that point, analysis earlier this year found that over the past 25 years HgCapital Trust (LSE:HGT) delivered the second-best returns out of all investment trusts. HgCapital Trust tops the table this week, moving from a small premium to a small discount. It has bucked the wider trend by not having a big discount. The trust has produced strong performance over the past year, with its share price total return up 35.1%.

There’s no other clear-cut trends evident in the table, with the other seven trusts all in different sectors. Second in the table is Henderson European Trust (LSE:HET), which is now on a discount of -12.8%. In third place is Gulf Investment Fund Ord (LSE:GIF), moving to a discount of -12%.

Source: Morningstar. *Data from close of trading 22 August 2024 to close of trading 29 August 2024.