The median discount to net asset value (NAV) for investment trusts narrowed over 2015 from 7.5 per cent to 6.6 per cent, reports research company QuotedData, despite last year's market volatility.
UK Smaller Companies, European Smaller Companies and Japanese Smaller Companies were among the sectors that experienced the greatest positive rating changes, with increases in their median premium or discount to NAV of 8.1 per cent, 6.5 per cent and 2.9 per cent, respectively. QuotedData said the rating improvements in these sectors suggest investors have been buying those funds on the back of their decent performance in 2015.
The median discounts of all UK equity-focused trusts followed a similar pattern of widening in the run-up to May 2015's general election, reflecting heightened uncertainty. This was subsequently followed by a period of narrowing once a Conservative victory had been confirmed, which was generally considered to be the preferred outcome for UK businesses. This shift was most apparent for UK smaller companies trusts, whose median discount moved from approximately 14 per cent to 5 per cent during the year.
"This arguably reflects a gradually improving outlook for the UK economy, although it brings the prospect of interest rate rises, already seen in the US, closer," commented analysts at QuotedData. "This may explain why the median UK income and growth discount has widened from a 1 per cent premium to a 2 per cent discount during the year."
The UK smaller companies trust that saw the greatest rating improvement was Athelney Trust (ATY), which tightened by 15.7 per cent. This trust has a market capitalisation of less than £5m and QuotedData said that a small amount of buying activity was sufficient to narrow its discount.
The sector for which the median discount/premium widened the most was Commodities & Natural Resources, at 12.2 per cent. QuotedData said this reflects investors becoming more despondent about the sector.
Biggest changes in discounts and premiums by sector over 2015
| Sector | Change in sector median premium/discount (%) | Median premium/(discount) at 31 December 2015 |
|---|---|---|
| Property Direct - Europe | +13.4 | -11.5 |
| UK Smaller Companies | +8.1 | -5.6 |
| European Smaller Companies | +6.5 | -6.4 |
| Japanese Smaller Companies | +2.9 | -8.7 |
| UK All Companies | +2.9 | -5.9 |
| Global | +2.9 | -2.8 |
| Europe | +2.7 | 0.1 |
| Infrastructure - Renewable Energy | +0.1 | 3.5 |
| Property Direct - UK | -0.2 | +9 |
| Global Equity Income | -0.8 | -1.2 |
Source: Marten & Co, Morningstar
