Investment trust bargain hunter: three trusts to take profits from

The remarkable resilience financial markets have displayed post-Brexit has made it tougher for private investors to bargain hunt in the investment trust space.

There have been opportunities over the past two months, with some UK small-cap specialist trusts looking attractive towards the end of July as highlighted in our Bargain Hunter series.

Our series in July also highlighted some potential trust winners from sterling's depreciation trading on unusually wide discounts. One trust highlighted was Money Observer Rated Fund Murray International. On 4 July the discount was 7.4 per cent. It has since tightened to 2.1 per cent.

According to the latest edition of the Investment Trust Newsletter, produced by McHattie Group, there are a growing number of 'expensive' trusts on the back of stock market behaviour since Brexit.


Trusts highlighted where there is a case for selling include Sanditon Investment Trust, trading on a premium 'that does not seem justified by its performance', and Chelverton Small Companies Dividend Trust, which is on a high rating.

The trust's discount, at 4 per cent, is well below its 12-month average discount figure of 9 per cent. The trust is also highly geared, a position that may hurt performance if stock markets fall out of form.

Trusts that specialise in buying US equities were also identified as being at risk of a fall due to the upcoming presidential election, which in all likelihood will result in higher levels of volatility. Expensive valuations were cited as another concern.

RIT Capital Partners, the conservatively positioned multi-asset trust, is another trust where it may pay to take profits. Stockbroker Stifel last week (23 August) gave the trust a 'sell' rating.

The stockbroker said the trust premium, which stood at 7 per cent, is close to its highest level for five years. On 29 June, a week after the European Union referendum vote, the trust was trading on a 5 per cent discount.

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