Discount Delver: the 10 cheapest trusts on 9 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. 

One of the best-performing investment trusts of the past 20 years was at the top of this week’s Discount Delver list: HgCapital Trust.

Moving from a 4.5% premium to a -4.7% discount, this trust invests in private software companies which often provide critical business tools, such as human resources or accounting software. The £2.4 billion trust’s shares are up 17% this year despite the recent pullback.

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Four other private equity trusts made the list: Partners Group Private Equity, JZ Capital Partners, Apax Global Alpha and Pantheon International. These trusts are on far wider discounts than HgCapital, at between -30% and -40%, reflecting investor worry that their underlying investments are overvalued as a result of higher interest rates. 

Another wide discount, increasing by eight percentage points last week, is on North Atlantic Smaller Companies, which is now on a -30% discount. It invests globally in smaller shares, as well as third-party funds, and was caught up in the equity market turbulence last week, as investors fretted about a slowing US economy.

BlackRock Latin American, RTW Biotech Opportunities, Crystal Amber and JLEN Environmental Assets Group complete the Discount Delver list, with discount moves of between seven and five percentage points.

The largest discount here is on JLEN, at nearly -21%. Similar to private equity trusts, it's unlisted energy assets, such as solar and wind farms, are valued by the investment trust rather than stock market investors. This means that there can be doubts over the true worth of the assets, which can lead to discounts appearing on the trust's shares. 

Source: Morningstar. *Data from close of trading 1 August to close of trading 8 August 2024.