- Investment trust discounts offer opportunities for selective and patient investors
- Discounts have widened in most sectors over the past year, with the exception of private equity
- We ponder some cheap trusts
Investment trust investors have had a brutal 12 months. Last November, our 2022 investment trust special issue highlighted just how widespread share price discounts to net asset value (NAV) in the sector had become. Since then, things have mostly got worse.
Investment trust discounts are a reflection of a lack of demand for their assets, caused by a combination of factors. The macroeconomic environment is certainly unfavourable. Higher interest rates and recession fears have curbed demand for growth assets. And alternative investment trust valuations, for example in the infrastructure sector, are vulnerable to higher rates because the resultant increase in their discount rates reduces the value of their future cash flows.