Investment trust insider on high yielding UK plays – James Carthew: Seven bargain yield plays left high and dry in rates rout
Inflation is proving more stubborn than hoped and interest rates are continuing to climb. The Bank of England’s latest 50 basis point interest rate increase seems unlikely to be the last. The effect of this on the investment companies’ sector has been dramatic. Discounts have widened almost across the board. Among the hardest hit have been previously prized sectors such as infrastructure and renewable energy. The share prices of funds such as HICL Infrastructure (HICL) and Greencoat UK Wind (UKW) fell sharply on the back of the latest rate hike.
It feels as though there is a simplistic approach being taken to valuing these funds based on the comparative yields on less risky investments such as deposits and gilts. With base rates of 5% and one-year gilts yielding 5.25%, it is reasonable to ask what the right yield for a UK-focused fund should be.
Regional looks oversold
Right at the top of the yield pile of UK-focused funds is Regional Reit (RGL), which offers investors a 14% yield…. read more here