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.
Many investors are attracted to investment trusts for the discount opportunities: e.g. for the chance to buy £1 of assets for 80p or less (see our Discounted Opportunities Portfolio for some potential examples). However, particularly in volatile market environments such as today’s, some investors may be put off by the uncertainty that discounts bring: they may worry about the possibility of trying to ‘catch a falling knife’, as it can be difficult to call when a discount will rebound or when it will widen further. For this reason, many boards aim to keep the shares trading close to NAV, and some investors will consider this in itself as adding to the attractions of a trust by lowering the volatility and uncertainty. In this article we consider which trusts have the best record when it comes to discount volatility and the reasons for this, and what these trusts might bring to a portfolio.
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