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The UK trusts on the biggest discount or premiums relative to their history

Trustnet

By Eve Maddock-Jones, Reporter, Trustnet, 19 November 2021

Trustnet looks at which UK investment trusts are trading below their five year average discount/premium level and which ones are running well ahead of the norm.

Several UK investment trusts are running well below their five-year-average discount presenting major buying opportunities, according to fund pickers.

The pandemic created a lot of volatility in markets with massive swings between growth and value investing during the initial crisis in 2020 and the recovery in 2021.

Investment trusts are more vulnerable to the whims of investors than their open-ended counterparts as withdrawals can cause the share price to drop, even if the underlying holdings keep their value. This creates a share price discount.

This phenomenon means if the underlying stocks fall, and investors sell out of the trust, shareholders that stick with it can be hit with a double whammy of losses.

However, the opposite is also true. If more people buy, then the shares could reach a premium to the value of the trust’s underlying holdings.

At times, trusts on a big discount can present good buying opportunities, while those that are on large premiums risk reverting back if the trust’s returns cannot keep pace with investor enthusiasm.

However, solely looking at a discount or premium can be misleading. A trust may always be highly valued or shunned by investors for a number of factors. As such, Trustnet asked QuotedData to look at the current discount and premiums of trusts in the IT UK Smaller Companies, IT UK All Companies and IT UK Equity Income versus their own five-year average.

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