Stocks Are on Sale in the UK — If You Know Where to Look
Discounts on investment trusts may signal a turning point for British equities.
These are exciting times in the UK’s investment trust sector, believe it or not. In the first seven months of the year, the sector as a whole returned a net of almost nothing — 0.4%. But dig a little deeper, and you’ll get to the racy details: the discounts.
There are plenty of reasons for shares in investment trusts to trade at a discount to their net asset value – the cost of their debt, the fees, uncertainties about the real value of the assets and so on. There is also good reason for the sector as a whole to have a higher average discount than in the past – it’s now jammed with the kind of vehicles that made hay in the now long-gone world of very low interest rates (think renewable energy, private equity and infrastructure).