Investment trust insider on discount opportunities – James Carthew: India trusts on the most unsuitable discounts
This has not been a great year for the investment company sector so far. Launches have dried up, fundraising is constrained to a few sectors, and performance figures are looking quite poor in some areas as a combination of widening discounts and gearing drags down investment company returns compared to equivalent open-ended funds.
For investors, rather than becoming disheartened, these periods in markets are often a good time to go bargain hunting. When markets turn, the combination of improved returns and a narrowing discount can supercharge your performance.
I wrote about the opportunity in private equity a couple of weeks ago and bought some Pantheon International (PIN) on a 40%+ discount last week.
Generally, all the big discounts on investment companies tend to be associated with funds invested in unlisted assets. Not only are those assets harder to value, but they are harder to sell to fund buybacks or a liquidation. Clearly, it is a different story for funds invested in listed equities, but it is important to look under the hood before buying.
Currently, the ‘prize’ for the largest discount, about 44%, on an equity trust goes to… read more here