how to spot a discounted fund bargain
By ROSIE MURRAY-WEST, FINANCIAL MAIL ON SUNDAY, 4 December 2021
Share prices have fallen sharply in recent days in response to fears over the potential economic disruption that the new Covid variant Omicron could cause.
While shares in specific sectors such as airlines and travel have been hit the hardest, investment trust share prices have also fallen.
Yet some investment experts believe the events of the past nine days now present an opportunity for brave investors who like to buy such trusts…
WHAT IT MEANS TO TRADE AT A DISCOUNT…OR A PREMIUM
Investment trusts are companies listed on the London Stock Exchange. To invest in one, you simply buy some of their shares and put them in your Individual Savings Account, pension or general investment account…
The unique structure of investment trusts means that sometimes the value of their shares is higher or lower than the value of their underlying holdings.
This is known as trading at a premium or a discount respectively…
HOW TO FIND THOSE TRUSTS WITH DISCOUNTS
You can find out whether an investment trust is trading at a discount by looking at its latest monthly fund factsheet, available from the fund provider.
Alternatively, information websites such as Trustnet and Morningstar provide this information as do all the major investment platforms.
However, this information alone is not enough to decide whether or not the discount is a good one to take advantage of.
Kyle Caldwell, a fund expert at wealth platform Interactive Investor, recommends that investors also need to look at whether the discount is smaller or larger than usual and how the discount compares to other trusts with similar investment mandates…
DISCOUNTED TRUSTS THAT ARE WORTH CONSIDERING
Interactive Investor’s Caldwell likes trusts Temple Bar and Edinburgh – both UK equity income trusts and managed by RWC Asset Management and Majedie Asset Management respectively…
James Carthew, a fund expert at research company QuotedData, likes Ceiba Investments, a specialist trust that comes with greater risks, but which may come good over time.
Ceiba Investments buys companies in Cuba and its shares are trading on a large discount. The underlying holdings are valued at 95p a share, but the shares are currently trading at just 65p.
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