Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
One of the key attractions of investment trusts is the chance of finding a bargain. If shares are bought at a significant discount to NAV and that discount narrows, it offers a source of extra returns not available with an open-ended fund. This can lead to exceptional returns, as has been shown by one graduate of our discounted opportunities portfolio discussed below. However, there are plenty of risks to be aware of. Investing in trusts on the basis of the discount potential alone is a risky business, given the potential for non-investment events to drive discounts – corporate action, illiquid shareholder registers etc. Moreover, discounts can persist for many years when sectors or managers are out of favour. Our discounted opportunities portfolio contains trusts we think represent a double opportunity: a wide discount alongside good NAV potential. Investors should be aware, however, that there is no guarantee that our ideas will be proven correct!
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