Investment company discounts widest since 2008
The average investment company traded at a discount of 16.9% at market close on 31 October 2023 – the widest discount for a month-end since December 2008.
The average investment company traded at a discount of 16.9% at market close on 31 October 2023 – the widest discount for a month-end since December 2008 when the world was in the depths of the global financial crisis.
On the last day of December 2008 the average investment company discount was 17.7%, according to the Association of Investment Companies (AIC).
The average discount started to widen at the beginning of 2022, when inflation and interest rates began to climb and war broke out in Ukraine. By the end of 2022 it had hit 12.5%.
Average industry discounts have to be interpreted with caution, as some underlying assets of investment companies are valued less frequently. This means that the discount for the end of October is likely to be revised in future, as new valuations become available.
“History shows us that current discounts could represent a buying opportunity. When discounts were last this wide at the end of 2008, the average investment company returned 39% over the next year and 119% over the next five years.”
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Investment companies have faced a number of headwinds including higher inflation and interest rates as well as unhelpful regulation.
“However, history shows us that current discounts could represent a buying opportunity. When discounts were last this wide at the end of 2008, the average investment company returned 39% over the next year and 119% over the next five years. The increasing presence of activist investors on investment company share registers shows that some, at least, recognise the value in the sector.”
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Notes to editors
- All discounts and performance figures exclude venture capital trusts (VCTs).
- The Association of Investment Companies (AIC) represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s vision is for investment companies to be understood and considered by every investor. The AIC has 345 members and the industry has total assets of approximately £262 billion.
- For more information about the AIC and investment companies, visit the AIC’s website.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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