Top trusts on double-digit discounts

A list of the 20 best performing investment companies over ten years that are currently trading on double-digit discounts has been published by the Association of Investment Companies (AIC).

Currently, the average investment company is trading on a 16% discount, compared to 12% at the end of December 2022.

Allianz Technology Trust is the top performing investment company on a double-digit discount. It has delivered a near-fivefold return to investors over the past decade and is trading on a 13.5% discount. Second up is India Capital Growth, which has achieved a similar ten-year return and trades at a discount of 11.3%.

The third-best performing of the 20 companies on double-digit discounts is Polar Capital Technology, which has generated a return of more than four times investors’ money and trades on a 14.2% discount.

The fourth and fifth best performers on discounts wider than 10% are both private equity investment companies, HgCapital on a 22.1% discount and NB Private Equity Partners on a 30.5% discount.

Private Equity is the sector that features most heavily in the list, accounting for eight of the top 20 companies. Six of these eight companies have discounts of more than 30%.

Investment companies investing in Vietnam have also done well over the long term despite sitting at deep discounts. Vietnam Holding and VinaCapital Vietnam Opportunity Fund are the sixth and seventh best performers on the list, with discounts of 14.1% and 21.1% respectively.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Investment trust discounts have widened since early 2022 due to rising interest rates and difficult markets. There’s now an enticing selection of investment trusts which have performed well over the long term and are trading on double-digit discounts.

“Discounts can present an attractive buying opportunity and in the past some brave investors who have bought at wide discounts have been rewarded with a double whammy of valuations rising and discounts narrowing".

“However, investors shouldn’t rely on discounts when researching investment trusts. It’s vital that they look under the bonnet and understand why a company is trading at a discount to its assets and why that discount might narrow. They also need to consider all the factors which make up the investment case, including performance, portfolio, charges and gearing.”

Comments from some of the managers of the top performing investment companies can be found beneath the table.

Top performing investment companies over ten years with double-digit discounts

Source: theaic.co.uk / Morningstar (data as at 20/10/23)

Mike Seidenberg, Portfolio Manager of Allianz Technology Trust, said: “We are arguably living in the golden era of technology where companies become relevant or irrelevant depending on their adoption and use of technology. Identifying companies solving some of the most difficult problems – such as global warming or access to information – is what we aim to do at the Allianz Technology Trust. Our team-oriented approach has identified secular themes over the past decade, and through a rigorous investment process, whereby we identify the risks and rewards of technology companies for shareholders, our goal is to do so going forward.”

Gaurav Narain, Manager of India Capital Growth Fund, said: “Reforms undertaken by the government between 2015 and 2019 have touched every sector of the economy and only now, post-Covid, are we really seeing the efficiencies coming through. The government has also rolled out digital infrastructure, which is low-cost and comparable to the best in the world. The digital transition has impacted the whole country, mainstreaming the rural population and enabling a more efficient economy. With an increasing proportion of the population moving up the wealth ladder to a point of greater consumption, a theme that has been and will remain central to the portfolio, we believe the opportunity in small and mid-sized companies remains strong with plenty of room to grow.”

Ben Rogoff, Lead Manager of Polar Capital Technology Trust, said: “We believe we have reached an inflection point in both the capabilities and adoption of artificial intelligence. We are at the starting point of another secular cycle of technology-led disruption, which could have a greater economic impact than the internet, mobile and cloud transitions before it. The Polar Capital Technology Trust provides a listed vehicle for shareholders to gain material exposure to the transformational technological change brought about by AI in a diversified way, with more than 75% of the 90-stock portfolio consisting of companies we believe are enablers and beneficiaries of AI.”

Luke Finch, Partner of Hg, which manages HgCapital Trust (HGT), said: “HGT gives investors an opportunity to invest in an area of growth via unquoted software companies that would otherwise be largely inaccessible. HGT has continued to see robust NAV performance both in the short and long term, across all market cycles. In the last ten years HGT has seen 18% annual compound growth in the NAV per share, performance that has been primarily driven by strong and consistent earnings growth. We believe that the current share price discount of around 20% to NAV does not reflect the underlying high quality of our portfolio. The NAV has been well evidenced by sustained levels of exit activity every year, with an average uplift to carrying value of around 40% since 2017.”

Paul Daggett, Managing Director at Neuberger Berman, which manages NB Private Equity Partners (NBPE), said: “Private equity has a record of outperforming public markets over the long term, with managers aiming to drive returns through active ownership – buying high-quality businesses, backing strong management teams, and driving strategic and operating changes to create value. NBPE is differentiated from other listed private equity funds. It coinvests alongside leading private equity managers directly in private companies. The portfolio is built investment by investment, focusing on two core themes, secular growth and/or low cyclicality, which we believe give the portfolio the potential to perform across a wide range of environments.”

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Notes to editors

1. 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.
2. For more information about the AIC and investment companies, visit the AIC’s website.
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