Discounts to net asset value have widened in many parts of the trust space

The year so far has seen significant volatility for global stock markets driven by concerns over red-hot inflation, the impact on share prices of rising interest rates and war in Ukraine.

Crunching the latest data from Winterflood Investment Trusts, Shares has spotted that discounts to net asset value have widened on a variety of trusts with interesting strategies and prospects.


For instance, in the Association of Investment Companies’ Global sector, the NAV discount on Bankers (BNKR) has moved out from a 12-month average of 0.9% to 5.7%.

Steered by Janus Henderson Investors’ Alex Crooke, Bankers looks to achieve long-term capital gains better than those of the FTSE World index as well as annual dividend growth which is ahead of inflation. The trust continued to post good returns during the financial year to October 2021, which also saw its 55th consecutive year of dividend increases.

However, it underperformed the benchmark due to a more defensive tilt than the broader market, which created a headwind during that period.

Caught up in the broader sell-off, Bankers’ pullback from December’s share price peaks likely reflects concerns over deteriorating prospects for global growth due to inflation and the war in Ukraine, and perhaps weakness at tech names such as Microsoft, the biggest holding in the trust, Apple and Automatic Data Processing, as well as worries over the prospects for consumer-facing stocks including Estee Lauder.

Bankers is highly diversified, with assets spread across 170 holdings, and has demonstrated impressive dividend consistency underpinned by healthy revenue reserves which help to smooth out the impact of fluctuations in dividend payments from its holdings in individual years.


Elsewhere within the Global sector, trusts managed by Edinburgh-based Baillie Gifford have seen their discounts widen out significantly amid the savage rotation from quality growth to value.

Among them is Monks (MNKS), where the NAV discount has moved out from a 12-month average of 0.6% to 6.2%, which may pique the interest of patient portfolio builders with long-term investment horizons.

Managed by Spencer Adair, diversified growth fund Monks has traded at a premium in periods past thanks to its excellent long-run record and levies a frugal ongoing charge of just 0.43%.

With the growth style out of favour, Baillie Gifford stablemate Keystone Positive Change (KPC), the Kate Fox and Lee Qian-managed trust invested in the likes of Tesla, Moderna and Illumina, has seen its NAV discount widen from 3.8% to 11.3%.

A modest March rebound at Baillie Gifford’s flagship trust Scottish Mortgage (SMT), a big investor in technology stocks where profits are some way off, has actually seen its 0.7% 12-month average discount move to a 1.6% premium.

In the Global Smaller Companies sector, Baillie Gifford’s Edinburgh Worldwide (EWI) has seen its discount deepen from a 12-month average of 1.7% to 10%, while in the UK All Companies sector, Baillie Gifford UK Growth (BGUK) has seen its discount widen from 0.9% to 6.4% and Ballie Gifford Japan (BGFD) has drifted from a 0.8% premium to a 4.3% discount.


In the Flexible Investment sector, the discount on JPMorgan Global Core Real Assets (JARA) has widened from 3.1% to 10.8%, which seems surprising given investors’ demand for inflation protection for their portfolios.

A multi-asset fund invested in real estate, infrastructure and transportation assets, which all generate returns that are uncorrelated with equities and bonds, this trust’s ability to weather current volatility and rising interest rates may be underappreciated. It’s a good stock to buy now.

Over in the UK Equity Income sector, the market rotation out of technology-related stocks and into more value style investments has boosted Temple Bar (TMPL).

With its value style back in favour the discount, in double digit territory at times last year, has come in from a 12-month average of 6.3% to 2.5% with investors eager for greater exposure to value-style stocks.

Temple Bar’s results for the year to December 2021, the trust’s first full year under the management of Redwheel’s Ian Lance and Nick Purves, showed a NAV return of 24.5% versus 18.3% from the FTSE All-Share.

Winterflood’s data also reveals that prevailing risk-off sentiment has thrown up potential opportunities in the UK Smaller Companies sector, where the weighted average discount has widened from 6.6% to 9.3%.

Well-managed trusts with impressive 10-year share price total return performances under their belts, such as Henderson Smaller Companies (HSL), JPMorgan UK Smaller Companies (JMI), Blackrock Smaller Companies (BRSC) and Invesco Perpetual UK Smaller Companies (IPU), appear cheaper than they’ve been for some time.

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