Trustnet continues its study into which trusts have the most inflated valuations and biggest discounts relative to their five-year average, this time focusing on global investment trusts.
By Eve Maddock-Jones, Reporter, Trustnet, 24 November 2021
Buying cheap trusts on a bigger discount than normal can be a lucrative way to make money over the long-term. Similarly selling trusts that have been bid up can help avoid losses if they eventually downgrade again.
As such, Trustnet asked QuotedData to look at the trusts which have diverged at least 5 percentage points off their five-year average premium or discount in the IT Global Smaller Companies, IT Global and IT Global Equity Income sectors.
Only two trusts were running at least 5 percentage points narrower than their five-year average premium/discount across all three sectors: Keystone Positive Change and Herald Investment Trust.
Part of the IT Global sector, Baillie Gifford’s Keystone Positive Change trust had one of the biggest shifts in discount relative to its history, now 8.8 percentage points tighter than its five-year average, 2.1% today versus 10.9% historically.
Baillie Gifford took over management of the trust from Invesco earlier this year and is now run under the same process and leadership as the Baillie Gifford Positive Change fund.
James Carthew, head of investment companies at QuotedData, said that this narrowing discount reflected the dramatic change in sentiment investors had towards the fund since Baillie Gifford took over.
The fund has done well over the past year since the takeover, coming out as the third-best performer in the sector (42.8%) but this was not enough to make it a buy option for Chris Salih, investment trust research analyst at FundCalibre.
That the fund is still on a lingering discount could be down to Baillie Gifford’s house style of concentrated growth being out of favour over the past year during the value rally, he said, but noted that it was not a “screaming buy” at its current levels.
Herald Investment Trust was the only member of the IT Global Smaller Companies sector in the study, a buck in trend from the UK study where small-caps had the most trusts diverging from the five-year average.
Read more here