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In the press

Investment trusts are going cheap in the stockpicker sales

David Brenchley, The Sunday Times, January 15 2023

The January sales are still on but you might find it more profitable to go shopping in the stock market instead. When share prices fall as sharply as they have since mid-2021, investors will inevitably be on the lookout for bargain opportunities.

Investment trusts are trading at their cheapest levels since the financial crisis in 2008 (apart from March 2020, as Covid took hold). The average discount in five sectors, including European property and growth capital, is more than 33 per cent…

At the end of 2022 the discount on the average investment trust was 12.3 per cent, having been 1.7 per cent at the end of 2021, according to the trade body the Association of Investment Companies (AIC)…

However, you shouldn’t assume that buying at a discount is automatically a good thing,” said Annabel Brodie-Smith from the AIC.

“Discounts are influenced by factors like an investment company’s performance and market sentiment. Investors should do their research on why there is a discount and how likely that is to narrow…

Where to look

A good example of a trust falling out of favour is RIT Capital Partners, which was set up to run the wealth of the Rothschild family. In July the trust’s share price and NAV were the same, but it has since fallen to a 16 per cent discount because of concerns about the valuations of its private equity holdings…

Property is also currently unloved and James Carthew from the research house QuotedData favours names in the logistics sector, where the trusts own warehouses used by ecommerce firms such as Urban Logistics and Tritax Big Box Reit…

Finally the renewable energy sector has plenty of positives as the world focuses on a low-carbon economy but worries over the impact of windfall taxes, higher interest rates and volatile power prices have seen shares fall from longstanding premiums to discounts, said Carthew.

He singled out Ecofin US Renewables Infrastructure, which fell after a change in portfolio manager but will “snap back in again now a new manager is in place”.

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