Trustnet looks at the investment trusts that have either gone to a bigger premium or a narrower discount across June.
By Rory Palmer, Reporter, Trustnet, 27 July 2021
Chrysalis Investments, Gresham House Strategic and Oakley Capital Investments were all more expensive than their long-run average in June, according to QuotedData.
Investment trusts can trade at a premium to net asset value (NAV) for several reasons: the region or sector may be in favour; it may be performing well or run by a popular manager; or it may have a higher than average yield.
While those trading on a premium look strong in terms of performance, if an investor pays that premium and the figure falls, they will lose money.
Just as with any other share, if you pay 100p and the price falls to 80p, you will have lost 20% of your capital.
Sometimes, if a trust pays a higher income, that can be enough to offset the capital loss. However, this is not guaranteed and there is a risk that the pay-out also falls.
Similarly, trusts on a usually very wide discount can be bid up, reducing this and making them relatively more expensive but if the move is unsustainable, they may be in danger of slipping back.
Below Trustnet highlights five investment trusts that are more expensive than usual.
First up, the £1.1bn Chrysalis Investments trust went from a 0.6% discount at the end of May to a 19.3% premium at the end of June.
QuotedData investment company analyst, Jayna Rana said that while it had announced a £75m investment in leading retirement platform Smart Pension, the price move was more reflective of hopes for an uplift in its end of June NAV.
Managed by Nick Williamson and Richard Watts, the managers have said that Chrysalis is only “scratching the surface” of the opportunities available in the late-stage private market.
The managers commented: “Our original hypothesis of a blurring of the lines between private and public markets appear to be playing out and our crossover proposition, backed by significant scale is resonating strongly with entrepreneurs.”
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