Tom Aylott, Portfolio Adviser Magazine, February 2024:
Poor market conditions have sent the share price of investment companies plummeting in recent years, with 93.8% of all trusts now trading at a discount to their net asset value. While this has been a thorn in the side of many portfolios, widespread discounts could be used to investors’ advantage, especially if they shrink as significantly this year as these trust selectors anticipate. Here, they share the five heavily discounted investment companies they expect to return to a premium in 2024.
Polar Capital Technology. This was one of the top-performing trusts of the past decade, up 482.5%, but short-term volatility has dragged its share price to a discount of 12.4%. Soaring inflation and interest rates have been tough on tech firms, especially in the bearish markets of 2022. The trust ended that year on a discount of 12.6%, where it has hovered ever since, despite roaring back with its familiar outperformance..
Another top-performing trust on an abnormally wide discount is Scottish Mortgage. It is up 303.7% over the past decade and is renowned for its highgrowth strategy. This investment process has served its shareholders well in the past, but has left the trust especially vulnerable to monetary tightening..
Vietnam Opportunity is trading at a 20% discount due to investors showing little interest in Vietnamese equities, but that could be about to change. With the trade war between the US and China ramping up, multinational companies are seeking to diversify their supply lines and manufacturing away from China and into the surrounding nations – something Vietnam is prime to benefit from..
Pantheon International offers one of the biggest opportunities to take advantage of a wide discount, says Hewitt. Trusts investing in private equity were particularly unfavourable when central banks were hiking interest rates, with shares in Pantheon International falling to a sizable discount of 34.4%..
One discounted opportunity that is approaching an interesting turning point, according to QuotedData’s head of investment companies James Carthew, is Invesco Select. The strategy is split across four portfolios – UK Equity Shares, Global Equity Income, Balanced Risk Allocation and Managed Liquidity – but the board intends to merge them into a single trust.
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