Kathleen Gallagher, Investment Week, 10 March 2022:
Since Russia invaded Ukraine on 24 February, investment trusts have, unsurprisingly, seen big moves in their discounts and premiums, this is leading to some trusts looking expensive and others starting to look more appealing.
The figures from the Association of Investment Companies and Morningstar excluded those with large exposure to Russia because of the difficulty of valuing the underlying assets at this time. The data set looked from 24 February until 4 March.
The £56.2bn Jupiter Green trust had seen the biggest benefit during this time period, with its discount narrowing from 18.7% to 8.6%. Matthew Read, senior analyst at QuotedData, noted that there is no “obvious explanation” for this move and as such it “now looks expensive”.
He noted that there are some “clear trends” within the data, such as energy funds and renewable energy funds, seeing improvements.
Indeed, the vast majority of renewable energy infrastructure funds saw their discount/premium tightening over the period with just two, Aquila Energy Efficiency Trust and US Solar fund seeing a widening of 1% and 3.1% respectively.
However, it is important to note alternatives are not valued on a daily basis so discount movements over a short timescale can be difficult to interpret and may not be meaningful.
BlackRock Energy & Resources, the trust with the third highest positive movement is now “looking quite fully valued,” according to Read. It has moved from a1.3% discount to a 5.6% premium, which is way above its long-term average, commented Read.
He noted that premium could be seen as fair given that we are now at a 13-year high for oil.
“However, given the backdrop, it is surprising that Riverstone Energy’s has not come in further as it could really benefit,” Read noted. The trust had been on a 39.5% discount which has closed to 35.8%.
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