Diving into discounts
We delve into 53 years of discount history
The Association of Investment Companies (AIC) has released data for the average investment trust discount going back to 1972.
The monthly data begins on 29 December 1972 and is sourced from Morningstar. Calculated by the AIC using a consistent methodology over a 53-year period1, it paints a picture of how investment trust discounts have changed over more than half a century. The graph shows the average investment trust discount from 1972-2025.
Double-digit discounts persisted for a period of 16 years, 6 months, between December 1972 and June 1989. There was another extended period of double-digit discounts between June 1997 and January 2001, of 3 years, 7 months. The current period of double-digit discounts, beginning in May 2022, has so far lasted 3 years, 7 months (to December 2025).
The widest ever average discount was recorded in October 1976, a discount of 41%. This was the month of a terrorist bombing of a Cuban flight from Barbados to Jamaica, which killed all 73 people on board.
Nick Britton, Research Director of the Association of Investment Companies (AIC), said: “In the 1970s and 1980s, investment trusts generally traded at double-digit discounts. Discounts were narrower through most of the next two decades, though they widened during the financial crisis. The 2010s was the one decade when investment trust discounts averaged less than 10% over the ten-year period.
“Investors should bear in mind that historically, investing during periods of double-digit discounts has tended to lead to better returns over the following five years.”
“Of course, things have moved on a lot since 1972. The change in legislation in 1999 to allow investment trusts to buy back their own shares has helped many trusts trim their discounts. Increasing competition from other fund structures, such as ETFs, has changed investors’ expectations about what level of discount is acceptable.
“The change in legislation in 1999 to allow investment trusts to buy back their own shares has helped many trusts trim their discounts. ”
“Investment trust boards are not complacent about discounts. We’ve seen record levels of share buybacks and corporate activity over the past few years. Investors should bear in mind that historically, investing during periods of double-digit discounts has tended to lead to better returns over the following five years.”
A historical perspective
Discounts were very wide during the 1970s, averaging 26% over the period for which we have data2. This was a decade of high inflation, high unemployment, stagnant growth and oil shocks.
Things improved a little in the 1980s, with an average discount of 20%. The relatively benign conditions of the 1990s brought the average discount to 10%, where it stayed during the following decade. During the 2010s an environment of low interest rates and high demand for income-paying investment trusts brought the average discount to 8%, while so far this decade it has averaged 13%.
The narrowest ever average discount of 2% was recorded in December 1993. The UK had emerged from the recession of the early 1990s and the aftermath of Black Wednesday in 1992, and was enjoying a period of lower inflation and falling interest rates.
