According to Wins, the sector average discount to net asset value (NAV) tightened in the second quarter of the year from 5.8% at the end of March, to 4.1% at the end of June. It says much of this re-rating took place in early April, with discounts remaining relatively stable since.
Since the start of 1990, the long run average discount for the investment trust sector has been 9.5%. However, in the last 10 years, assisted by factors such the adoption of discount control mechanisms and buyback programmes, the average discount has fallen to 7.3%.
The recent falling discounts were assisted by generally strong performance, with Wins noting the investment trust sector delivered a fifth consecutive quarter of outperformance in the second quarter.
“So far in 2017 the investment trust sector is up 10.6% compared with an increase of 5.5% for the FTSE All-Share,” said the report. “This outperformance is in contrast to 2016, when the sector lagged in three of the four quarters.”
In the second quarter the vast majority of sub-sectors delivered positive NAV performance, with Europe Smaller Companies sitting top of the pile with a return of 6.5%. In second place was Japan Smaller Companies, which rose 5.9%, and Europe General, which was up 5.3%.
In contrast, six sectors delivered negative returns, the worst of which was Commodities which fell 4.2%, followed by North American Income which was down 3%.
“In general it was a strong period for growth orientated sectors, while income strategies were more muted,” said Wins.
