Tom Aylott, Portfolio Adviser, 27 March 2025:
Widening discounts have plagued the investment trust industry for several years now as company shares continue to lose value versus their underlying assets. Multiple efforts were made to remedy this ongoing dilemma in 2024, including the highest level of share buybacks in the sector’s history..
Yet despite boards’ best efforts, discounts continued to widen even further in 2024. They stretched another 0.6 percentage points throughout the year to 13.5%, according to figures from QuotedData, with the market capitalisation of the sector also dropping from £178.9bn to £172.2bn.
Some sectors did a better job at reducing their discounts than others..
Some sectors dropped their discounts in the more traditional sense – by delivering strong returns. IT Growth Capital went from a discount of 45.8% to 35.4% as trusts such as Petershill, Seraphim Space and Chrysalis reported good returns, climbing 63.8%, 58.2% and 49.9%, respectively, throughout the year.
Although 22 of the 45 investment trust sectors shrank their discounts in 2024, a handful of the biggest detractors continued to see their share prices fall further away from their net asset value. Alternative areas such as IT Infrastructure, IT Renewable Energy Infrastructure, IT Insurance and Reinsurance Strategies, and IT Property – UK Logistics weighed on the industry as a whole, according to James Carthew (pictured), head of investment company research at QuotedData.
“There’s been no shortage of effort from boards to lower those discounts. There has been a lot of corporate action, a lot of buybacks and a lot of wind-up decisions, so it will eventually snap back,” he says.
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