Investment trust shares followed the pain of an 18% fall in 2022 with more tough treatment in 2023, with another 8% decline - but there is now "light at the end of the tunnel" according to analysts.
The average investment company returned 9.9%, however last year, according to the AIC, or 5% according to Stifel.
Meanwhile the average discount shortened from around 18-19% to below the 10% mark according to the AIC and around 13% per Stifel by the end of the year.
Following the fall in discounts, the Stifel analysts said: "We hope this signifies the light at the end of the tunnel and, if rates continue to remain off the peaks, this year could finally deliver a bit more joy for the sector as macro headwinds subside and fundamentals have a chance to shine."
Even after a positive final two months, most sectors experienced discount widenings over 2023, the largest being hedge funds due to BH Macro's (LSE:BHMG) 18% derating following its equity raise in February.
The infrastructure and renewables sectors derated -13% and -10% respectively as relative yields became increasingly attractive in other asset classes, Stifel noted, while NAVs also came under pressure from rising discount rates.
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Biotechs derated, the analysts noted, "despite being on cheap valuations due to rising rates and sector specific negative news, though these have started to rally towards the end of the year".
The private equity sector started the year on a gaping discount not far off 40% and tightened slightly, but Stifel flagged that it remains wide, at 30% - in a year when PE exits shrank markedly.
Best and worst performers
Best performers within the sector were tech trusts, driven by the Magnificent Seven and the AI story, while income strategies were hit hard with renewables and infrastructure trusts in particular struggling.
Among the best performers were Polar Capital Technology Trust PLC (LSE:PCT), up over 50%, and Allianz Technology Trust PLC (LSE:ATT), around 45%, both made back much of their 2022 declines.
Topping both was Manchester & London Investment Trust plc (LSE:MNL) at around 70%, helped by very heavy weightings to Microsoft and Nvidia.
As Indian equities went on a tear, this sub-sector was notable on the risers list, with India Capital Growth Fund Ltd (LSE:IGC) up 34% and Ashoka India Equity Investment Trust PLC (LSE:AIE) rising 27%.
The largest fallers were dominated by income strategies as yields on offer elsewhere became increasingly more attractive, but Digital 9 Infrastructure PLC (LSE:DGI9) fell the most heavily after announcing a dividend cut, then as it sold one of its businesses at a "suboptimal price" and structure, said Stifel.
These included infrastructure and renewables funds such as SDCL Energy Efficiency Income Trust PLC (LSE:SEIT), GCP Infrastructure, VH Global Sustainable Energy and Downing Renewables & Infrastructure Trust PLC (LSE:DORE).
US Solar Fund PLC (LSE:USF) was the weakest of the renewables funds after failing to receive an attractive takeover bid during its strategic review, while shipping funds like Taylor Maritime Investments Ltd (LSE:TMIP) were affected by weaker charter markets and the battery storage funds performed poorly due to a lower revenue backdrop in the UK, hitting Harmony Energy Income Trust PLC (LSE:HEIT) and Gresham House Energy Storage Fund PLC (LSE:GRID) heavily, while Gore Street Energy Storage Fund PLC (LSE:GSF) avoided inclusion on the fallers list.