by Holly McKechnie, Investors Chronicle, July 1, 2025:
For the first time in a long time, there is some positive news on the investment trust discount front.
Over the past three months, the average investment trust discount has started to narrow, having reached new highs in April following the tariff turmoil. Analysts are hopeful that this trend will continue.
Several factors are behind this shift. In part it has been driven by increased investor confidence, as markets bounce back following April’s dip..
Broadly the discounts narrowing are reflective of the movement of major indices during this period.
However, other factors have also had an impact. Share buyback programmes, prevalent across the sector since interest rates started to go up in 2022 have, up until now, had limited success in addressing the average discount..
“Buying back stock when you’ve got assets that are quite illiquid is hard,” James Carthew, head of investment company research at QuotedData, said. However, alternative asset trust boards have begun to make some progress, which is reflected in the narrowing average discount.
“They have rejigged the way that those funds work so that they have cash available to fund buybacks, which has been a long, slow, painful process, but a lot of them are doing it now,” Carthew added..
Meanwhile, more established activist trusts have also stepped up the pressure.
“AVI Global (AGT) has, for ages, been buying stakes in private equity funds. But it’s shifted from just investing in funds with wide discounts, to investing in funds with wide discounts and trying to do something about it. It changes the mindset of it,” Carthew said.
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