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The US trusts on wide discounts relative to their recent history

By Tom Aylott, Reporter, Trustnet, 21 November 2022:

Trusts investing in the growth-oriented US market have faced challenging conditions this year as their investment style falls out of favour…

On the bright side, declining markets could offer an attractive entry point for investors looking to increase their exposure to the US. Here, Trustnet looks at the US trusts trading on the biggest discounts compared to their five-year averages.

The JPMorgan US Smaller Companies trust was on the biggest discount compared to its historical average, down 4.4 percentage points from the 3.2% discount it traded at on average over the past five years…

Its wider discount may be because returns this year have slumped – the trust is down 11.7% but Tom Sparke, investment manager at GDIM, said that this made it look attractive…

The BlackRock Sustainable American Income trust was on the second largest discount to its five-year average, down 2.9 percentage points to 5.9%.

The £161m portfolio introduced its environmental, social and governance (ESG) theme in July 2021, but James Carthew, head of investment companies at QuotedData, said that “it hasn’t done much for its rating or its performance”.

Since its rebrand, the trust has been outperformed by “its main competitor” – the North American Income trust. Likewise, the rival fund has high exposure to value stocks, which has helped its performance in the current environment. It has made 16.6% since the start of the year while the BlackRock Sustainable American Income trust is up just 2.1%, as the below chart shows.

“It can also boast much better dividend growth and dividend cover than the BlackRock fund,” Carthew added.

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