Investment trusts have sunk to their widest sustained discount since the depths of the global financial crisis, with analysts highlighting a wealth of cheap-looking funds that could eventually prove bargains for contrarian investors.
Overall, the wider investment trust sector derated from an already wide average discount of 13% out to 16%, which analysts at Stifel said was the widest discount for an extended period of time since 2008-2009.
Among other things, it could mean that Ashoka WhiteOak Emerging Markets will find it hard to raise its planned £100mln.
While investment trust share prices started the year on the front foot, the sector ended the first quarter down 1%, largely due to the worries emanating from the banking sector after the collapse of SVB and Credit Suisse.
For investment trusts, the biggest de-ratings were seen in those focused on the financial sector, as well as property and infrastructure, as risks of fallout from the banks were reassessed.
The investment trust sector underperformed the wider UK market, with the FTSE All Share ending the quarter 3% higher despite wobbles around banks.
An average discount of 16% was last hit temporarily during the Truss-Kwarteng ‘mini budget’ crisis last September and before that in March 2020 during the initial pandemic sell-off.
With aircraft leasing the only sub-sector which rated upwards over the quarter, property was a big loser, with the average UK REIT discount to net tangible assets widening to 23%, though this is not as bad as September’s 30%.
The next largest de-rating was in the infrastructure sub-sector, where Stifel said investment companies saw renewed selling in March despite falling gilt yields.
Highlighted by Stifel was GCP Infrastructure, which derated from a 10% to a 25% discount over the quarter.
In financials, Polar Capital Global Financials and Augmentum Fintech PLC (LSE:AUGM) both saw their discounts widen following the collapse of SVB.
Looking outside of those sectors and away from trusts undergoing major restructuring, the biggest discounts are a diverse bunch: space technology investor Seraphim Space Investment Trust PLC (LSE:SSIT) (60.3%), the under-new-management Schroder UK Public Private Trust PLC (54.2%), Riverstone Energy Ltd (LSE:RSE) (53.7%) and Round Hill Music Royalty Fund Ltd (LSE:RHMP, OTC:RHILF) (51.6%).
There is also a bevy of private equity tech backers down there, led by Chrysalis Investments Ltd (LSE:CHRY) (54.5%), which was the largest price faller in the past quarter as it continued a woeful run from last year, followed not far behind by other private equity backers: Symphony International Holdings (53.3%), the Goldman Sachs (NYSE:GS)-run Petershill Partners PLC (LSE:PHLL) (52.3%), JZ Capital Partners (52.2%), HarbourVest Global Private Equity (49.9%) and Pantheon International PLC (LSE:PIN) (49.5%).
Biggest risers among investment trusts in the quarter included Nippon Active Value Fund (LSE:NAVF), which was the highest riser as Japanese small caps continued their resurgence, and rebounds for Polar Capital Technology Trust PLC (LSE:PCT) and Allianz Technology Trust PLC (LSE:ATT) which were both on the 2022 largest fallers list.
European trusts also benefited from the rebound in European equities as fears of a deep recession have eased, led by BlackRock Greater Europe, JPM European Growth & Income, Henderson European Focus and Baillie Gifford European Growth.