Deep Dive: Discounts are 'attractive' entry points but context is paramount

Trusts vs companies

In 2023, investment trusts traded at near record discounts – some of which continued into 2024 – providing “attractive” buying options for several managers and investors. But not all discounts, for either companies or trusts, should be considered investment opportunities.

Ryan Lightfoot-Aminoff, investment trust research analyst at Kepler Partners, explained that while discounts allow investors to buy a portfolio of assets below its stated value, they "must be viewed in context". Drawing a comparison over a trust's own history can be an efficient way to understand changes over time, as well as compare it with long-term averages, he noted. Discount scales should also be applied, as some discounts may be "wide statistically versus their own average, but a narrowing of the discount as it returns to mean, or even better narrower, may only add a few percent...