According to Winterflood, the average discount across the universe narrowed to 6.9% at the end of July, compared with 8.6% at the end of June and 4.5% at the start of this year.
Research analyst Simon Elliott notes that the vast majority of subsectors saw their ratings strengthen last month, with technology the strongest followed by UK property and infrastructure, the latter two sectors the largest in terms of real assets.
Indeed, infrastructure is the only investment trust sector trading on a premium at present. This might suggest that value investors might wish to steer clear.
However, for Rory McPherson, head of investment strategy at PSigma Investment Management, a shift away from austerity in major economies will be a boon to the sector as governments look to “grease the wheels of the economy” with infrastructure spend on high-level projects.
For now, the team prefers to play the sector through equities, as he explains: “Spending on infrastructure projects will provide a tailwind for infrastructure equities and is one of the reasons we have chosen to initiate an investment here.
“Others being its diversification properties, attractive yield, defensive and predictable nature, combined with its inherent inflation protection.”
He adds: “We’re not calling a rampant rise in inflation but do think the disinflationary environment we’ve been in should dissipate as the boot gets taken off the foot of monetary policy and placed on that of fiscal spending as governments cash in on the record low bond yields.”
