This year has been a tumultuous year for markets and the investment trust sector has not escaped the action. After three years of strong demand supporting discount tightening, 2016 saw discounts to net asset value (NAV) go back out at the start of the year due to concerns over China, then over the forthcoming referendum on the European Union (EU), and after it as markets and currencies tanked. However, since then there has been a tightening of investment trust discounts as investors have calmed and the UK market has enjoyed a rally.
Some investment trust sectors experienced particularly wide movements, such as UK direct commercial property trusts. A number of these traded on premiums to NAV as at 23 June, with the sector at an average discount to NAV of 2.5 per cent, according to broker Winterflood.
But as investor concerns over UK commercial property grew following the referendum, and open-ended funds suspended redemptions in early July due to a deluge of outflow requests they couldn't meet, premiums on UK direct property trusts fell to discounts, or discounts widened. By the week ending 8 July, nearly every UK direct property trust was on a discount to NAV and the sector average was a discount of 12.7 per cent.