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.
The ability to buy shares at a discount to NAV is one of the differentiating features of investment trusts versus open-ended funds, and is one factor behind them offering potentially higher returns. Of course, it brings with it extra risks, and the pandemic saw discounts widen across the board, compounding losses made on NAV. This is potentially an interesting tine to be looking for discounted opportunities after such a period of disruption. However, as we discuss below, on a universe-level discounts have almost returned to their pre-crisis level. But this hides a wide disparity of moves on a sector and stock level, as investors adjust to the potential impacts of a major crisis. After reviewing the state of play and where discounts have widened, we report on our discounted opportunities portfolio which has seen one major success, and we then highlight some interesting discounted trusts we will be featuring in our upcoming event.
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