11 of the biggest investment trust discount moves over past month’s steep market falls

We pick out 11 investment trusts that typically trade on a small premium but are now available on a discount, and in some cases a substantial one.

Except for the US dollar, which has hit its highest level against the British pound since the 1980s, there’s been almost nowhere for investors to hide over the past month.

Whether investing in funds, investment trusts, index funds or exchange-traded funds (ETFs), substantial paper losses will have been made amid continued uncertainty over both the short- and long-term ramifications of coronavirus on the global economy and business.

The message from various commentators is for investors to hold their nerve rather than crystallising losses, on the grounds that markets have eventually recovered their poise in various other stock market crises. However, the length of time needed this time is anyone’s guess, and for those approaching retirement such losses may never be recovered.

Trust dividend heroes can ride out another market storm

As far as investment trust investors are concerned, discounts have widened across the board. In terms of sectors, commercial property trusts have posted notably steep declines.

A month ago (20 February), the average commercial property trust discount stood at 3.2%, according to Winterflood, the investment trust broker. Fast-forward one month, a period during which global markets have endured sharp declines, and discounts for the sector have widened to 30.5%.

In other sectors the discount moves have been less dramatic; but there has been a trend of investment trusts that typically trade on small premiums slipping to discounts, and in some cases the discounts have widened significantly.

The table below shows 11 investment trusts that are now available on discounts, having been typically trading on a small premium over the past year.

Notable changes include fixed income trust Invesco Enhanced Income. On 20 February it was on a premium of 2.7%. It has now moved to a 24.4% discount.

Another example is Monks, which a month ago was trading on 4% premium and is now available on a 10.8% discount. As our Money Maker feature in the March edition of Money Observer pointed out, performance has impressed since Charles Plowden and his team took the helm five years ago. Prior to Plowden taking over, the trust was stubbornly trading on a discount in excess of 10%, but performance has improved and this has reduced over the years. However, following the market sell-off it is now back in double digits.

- Baillie Gifford's Charles Plowden on the catalyst that transformed Monks 

Smithson investment trust, the brainchild of Terry Smith, entered the record books as the biggest ever investment trust launch in October 2018. Investor demand was high ahead of launch and has continued since, resulting in the trust consistently remaining on a small premium. It is now available on a 19.6% discount; a month ago it was on a premium of 4.8%.

Elsewhere, TR Property, which a month ago was one of a small number of property-focused trusts on a premium (2.6%), has fallen to a discount of 28.5%.

Another big mover is Scottish American, which is now on a 20% discount. A month ago it was trading on a premium of 2.3%.

Three other trusts that usually trade on a premium, but have slipped to a discount are Finsbury Growth & Income, Mid Wynd International and Murray International.

Investment trust

Discount (%)*

12-month average premium (%)

Scottish American

-20

3.5

Monks

-10.8

3.7

Smithson

-19.6

2.7

Finsbury Growth & Income

-11.4

0.5

Schroder Asian Total Return

-17

1.9

TR Property

-28.5

0.4

Invesco Enhanced Income

-24.4

2.1

Edinburgh Worldwide

-12.7

1.5

Mid Wynd International

-6

3.2

JPM Global Growth & Income

-13.4

2.4

Murray International

-6.3

2.7

Source Winterflood. * As at 19 March 2020.

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