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The European trusts on the biggest discounts or premiums

By Eve Maddock-Jones, Reporter, Trustnet, 16 December 2021

Trustnet looks at which European investment trusts are trading below their five-year average discount/premium level and which ones are running well ahead of the norm…

The European market has been a strong performer over the long term, with the MSCI Europe index generating returns of 147.9% over 10-years, outflanking the FTSE 100 (92.7%). The only developed market to beat it was the US’ S&P 500 (347.4%).

But this year the market has struggled, underperforming both the UK and US indices, with a total return of 15.8% versus 15.9% and 28.4%, respectively…

In this series, Trustnet looks at which investment trusts had diverged at least 5 percentage points off their five-year average premium/discount, having already looked at the UK, Global, North American and Japanese sectors.

Buying trusts on a bigger discount can be a profitable way to make money over the long-term whereas those on a larger premium risk reverting back to the median if the trust’s returns cannot maintain pace with investors’ enthusiasm.

However the discount or premium on a trust is not the full story and focusing on just that can be misleading. If a trust is always on a big discount, or a large premium, then it may not offer value or be too expensive.

As such, Trustnet asked QuotedData to look at the current discount and premiums of trusts in the IT Europe and IT European Smaller Companies sectors versus their own history.

Out of both sectors there was only one trust running at a bigger discount than usual: the European Opportunities Trust. It is currently on an 11.8% discount, which is 6.5 percentage points off its average 5.3% discount over the past five years…

The other trust highlighted in this sector was BlackRock Greater Europe, this time moving in the opposite direction…

Moving onto the IT European Smaller Companies sector, there was only one trust highlighted: Montanaro European Smaller Companies Trust.

The trust is running on a 1.8% premium, a substantial rerating of 9 percentage points from its average 7.2% discount.

Read more here

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