Foreword
By Annabel Brodie-Smith
May was a month of frosts and log fires in Oxfordshire followed by a searing heatwave. My youngest son, Fabian, is ploughing on through his GCSEs whilst his elder brother has finished his first year at Edinburgh University and taken off to Guatemala, Belize and Mexico – I’m highly envious!
“Things are looking up in the world of investment trusts with the average investment trust discount at the end of May in single figures, 9.6%, for the first time in nearly four years.”
Things are looking up in the world of investment trusts with the average investment trust discount at the end of May in single figures, 9.6%, for the first time in nearly four years. Discounts reflect sentiment towards investment trusts and there are currently 25 popular investment trusts trading on a premium which means the value of their underlying assets (NAV) is higher than the share price.
These include Seraphim Space Investment Trust which has just raised £137m, Scottish Mortgage with its holding in SpaceX, the much-anticipated IPO and Anthropic which has recently filed to list. However, there are also lots of investment trusts investing in bonds and equities trading at a premium including Invesco Bond Income Plus, Temple Bar which has just celebrated its 100th birthday and Murray International.
And there are still double-digit discount opportunities for bargain hunters. These include a number of equity sectors including the UK Smaller Companies sector on an average discount of 10.7% and the Healthcare & Biotechnology sector on an average discount of 14%. As well as many of the sectors investing in alternative assets including Renewable Energy Infrastructure, Private Equity, Property - UK Commercial and Infrastructure.
“With discussions about a permanent ceasefire between the US and Iran continuing, oil prices continue to dominate the headlines.”
With discussions about a permanent ceasefire between the US and Iran continuing, oil prices continue to dominate the headlines. It’s an opportune moment to ask investment trust managers for their thoughts on the oil and gas sector and it’s well worth reading our release. The Iran war has focused countries’ attention on energy security, and many are evaluating their energy policies to deliver secure, resilient energy systems.
Mark Hume of BlackRock Energy and Resources Income Trust said: “Capital discipline across the sector remains strong, balance sheets are robust, shareholder returns are attractive, and demand for oil, gas and electricity generation continues to grow. Taken together, we believe this represents one of the most compelling medium-term setups for the energy sector seen in over a decade.”
Interestingly, Thomas Moore of Aberdeen Equity Income believes the conflict is influencing attitudes towards the UK’s energy supply: “Reducing domestic output might help politicians claim that they are achieving their net zero ambitions, but the UK is still consuming the same amount of oil and gas, whether we produce it domestically or not….While the debate rumbles on, we observe the low valuations of UK oil and gas stocks and consider how these stocks could re-rate if the restrictions are eventually eased on UK oil and gas production.”
And another topic gaining media coverage as the Labour leadership battle rumbles on is the bond market and the contenders’ attitude towards it. That’s why we have asked our investment expert Ian Cowie to explain what bonds are and how they work. And there’s a lot to like as Ian explains in his opening sentence, “Do you fancy more than 8% annual income from investment trusts focused on assets that are generally regarded as less risky than ordinary shares?”
Ian takes a look at some of the investment trusts in the Debt: Loan & Bonds sector which mainly invest in corporate bonds, highlighting CVC Income & Growth which yields 8.4% and CQS New City High Yield with an income of nearly 9%. And for those investors where capital preservation is a priority he focuses on investment trusts which invest in index-linked bonds for protection against inflation – namely Capital Gearing Trust, Ruffer Investment Company and Personal Assets Trust.
“And after a tough time, the performance of the investment trusts in the Global Emerging Markets sector is flying, with the average investment trust in this sector up 69% over the last 12 months.”
And after a tough time, the performance of the investment trusts in the Global Emerging Markets sector is flying, with the average investment trust in this sector up 69% over the last 12 months. Do take a look at our release to find out why. It’s clear that emerging markets are not just about cheap manufacturing anymore, they are global leaders in research, innovation and production at the cutting edge of an unprecedented AI hardware boom.
On 17 June, I'm participating in a panel to explore why investment trusts deserve a place in younger investors' portfolios. Organised by Law Debenture WIN* Widening Investor Networks, please do encourage any younger investors to come along to 100 Bishopsgate or dial in - it starts at 6pm. For further details and to register click here.
I hope you enjoy June. The poppies are out in my wild garden – they have taken a beating in the rain – but they are tough. And it’s not long until the end of the GCSEs - hurray!
Annabel Brodie-SmithCommunications Director, AIC
