By Jennifer Hill, Investment Trust Insider, 29 November 2024:
Investment trust discounts are heading in the right direction, having narrowed by almost four percentage points from their lows in October last year, but they still have plenty of ground to make up.
At the end of October 2023, amid rising interest rates and conflict in the Middle East, the average investment trust, excluding 3i Group, had sunk to 19.2% below net asset value (NAV) – the widest month-end discount since the depths of the financial crisis in 2008, according to the Association of Investment Companies (AIC).
By 19 November this year, the figure had narrowed to 15.4%, helped by central banks on both sides of the Atlantic starting their interest rate-cutting cycles over the summer and political certainty following the UK and US elections..
With the help of a range of analysts, we take a closer look at six sectors that remain on substantial discounts. What factors are at play and what is the prospect for discount narrowing?.
Flexible investment
Average discount: 22.7%
The multi-asset nature of investment companies in this sector means cost disclosure rules have weighed heavily. Discounts have widened by more than one percentage point since the end of October 2023. ‘Fortunately, these issues are now close to being resolved,’ said James Carthew, head of investment companies at QuotedData.
He regards Caledonia Investments’ (CLDN) near-39% discount as ‘nonsensical’ given its strong long-term performance and 57-year record of growing its dividends.
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