The investment trust space is currently awash with bargains, or so it seems. Share price discounts to net asset value (NAV) have ballooned out across the sector in the last year, but as ever one investor’s smart buy can be another’s value trap. For examples of this look no further than some of the most obvious 'bargains' available as we neared the end of 2022: short seller target Home Reit (HOME), which was going at a discount of nearly 70 per cent in mid-December, while investors have pressing questions about the underlying portfolios of other 'cheap' vehicles, be it Seraphim Space (SSIT) or Chrysalis (CHRY).
- Puts cash to work in a down market
- Benefits from dual layer of discounts
- Unique approach
- Broad diversification
- Big bet on private equity
- Slim dividend yield
The alternative assets in which investment trusts increasingly specialise come with plenty of unknowns, which means buying into a heavily sold-off fund in this space can introduce some very idiosyncratic risks to a portfolio. As enticing as the discounts on offer do look, it might therefore be worth taking a more conservative approach to the bargain hunt, via a more generalist trust.