by Kyle Caldwell from interactive investor, 28th February 2023:
Three years ago was a great opportunity to pick up bargains among investment trusts as the Covid-19 pandemic caused widespread panic and fear…
Three years ago is a case in point. In response to the emergence of Covid-19, stock markets fell notably, with the FTSE All-Share and MSCI World indices losing 25.1% and 15.7% respectively over the first quarter of 2020.
During that three-month period, investment trust discounts (on average) hit a record high of 21.4%. However, big bargain opportunities did not stick around for long, and when markets started to recover from early April 2020 onwards, discounts quickly narrowed to below 10%..
Plenty of bargains remain
Three years on, plenty of investment trusts remain on higher-than-usual discounts..
For those looking for wider discounts than three years ago during the Covid-19 sell-off, there’s not a huge amount of choice, as research by QuotedData shows. The firm ran data for interactive investor to find out which investment trusts are trading on bigger discounts today (five percentage points or more higher) than at their peak discount during the Covid-19 sell-off.
In total, 20 investment trusts made the cut…
Interest rates have caused discounts to wide..
James Carthew, head of investment companies at QuotedData, says: “Eastern European property company Globalworth Real Estate Investments has been impacted by rising interest rates, which are driving up property yields, and driving down valuations. The economic impact of the war in Ukraine has also been unhelpful.
“Schiehallion Fund has a high exposure to unprofitable growth stocks, exactly the kinds of shares that have been hit hardest by the ‘risk-off’ attitude of investors that has accompanied the increase in interest rates.”
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