James Crux, Shares Magazine, 21 September 2023:
According to data from the AIC, the average investment trust discount to net asset value has widened from 12.2% at the end of 2022 to 14.5% as of 8 September 2023, while sector averages have generally widened. The exception is private equity, which narrowed from 25.1% to 4.5%, skewed by 3i’s (III) dramatic swing from discount to premium…
Any signs that action is being taken to narrow the discount implies you could make money as the gap is closed…
Boards have proposed mergers, fee changes and the wind-up of investment trusts as well as implementing share buybacks at record levels. Several strategic reviews are under way, which are likely to lead to more consolidation in the final quarter of the year…
PANTHEON SETS THE STANDARD FOR PRIVATE EQUITY
Despite an excellent long-run performance record, 14 out of 17 trusts in the AIC’s private equity sector trade on double-digit NAV discounts amid concerns over portfolio valuations in a higher rates environment.
The board of Pantheon International (PIN), the FTSE 250 trust chaired by John Singer, recently sprang into action, committing up to £200 million to buy back shares in a bid to drive a re-rating. This is beginning to have a positive effect, with the discount narrowing from a 12-month average of 44% to 36.4%, admittedly still wide, at the time of writing…
CLOSURES AND TAKEOVERS
Boards of sub-scale trusts are biting the bullet and leaning into size and liquidity challenges, with the market witnessing more mergers, strategic reviews and wind downs…
MAKING PROGRESS
James Carthew, head of investment companies at QuotedData, has been ‘generally impressed’ by the way boards are responding to widening discounts.
‘It feels as though they have been swifter to act and are being more radical in their thinking than in previous downturns,’ he tells Shares. ‘Unfortunately, this is not stemming the tide of selling, as yet.’
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