According to Simon Elliott (pictured), head of investment trust research at Winterflood, the cheaper prices present a buying opportunity for investors seeking income or more defensive-minded trusts.
Harry Nimmo’s Standard Life UK Smaller Companies Trust is also trading at the cheap end of its historic range, on a discount of 5.5 per cent. However, Elliott thinks the best value is in the IT UK Growth & Income sector. "It’s one of the few sectors where the discounts have gone out this year, probably because of a rotation into more growth-oriented areas of the market," he said.
"The sub-sector most dramatically re-rated this year is private equity, a high-risk, high-return, risk-on trade."
"The UK growth and income trusts have done well and I still see plenty of demand for them in the coming months."
One of the funds Winterflood rates highest in the sector is the Perpetual Income & Growth trust, run by Mark Barnett for Invesco.
"We have Perpetual Income & Growth on a discount of 2.5 per cent compared with an average premium of 1.6 per cent, so it is slightly under where it has been," Elliott said.
"It’s yielding well above 4 per cent, which is very attractive, and we rate Barnett very highly."
The trust has made 46.99 per cent over the past three years in share price terms compared with the 28.77 per cent average of its peers. The FTSE All Share has made 17.34 per cent over that time.
Performance of trust vs sector and index over 3-yrs
Source: FE Analytics
Tom Tuite Dalton, investment trust analyst at Oriel Securities, notes that the Invesco Income Growth Trust, managed by Ciaran Mallon, is also at the limit of its six-month range.
The trust’s discount has moved between 1 per cent and 7 per cent over the past year, and is currently trading on a discount of 6 per cent.
Mallon’s trust has a much higher weighting to the FTSE 100 than Barnett’s, and has been less volatile over the past three years.
Its returns of 39.29 per cent are slightly below those of Perpetual Income & Growth.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
On a discount of 5.5 per cent, FE Alpha Manager Harry Nimmo’s Standard Life UK Smaller Companies Trust is also cheap compared with its recent range.
"I don’t think there’s any one reason why," he said. "Over the last year, it has averaged a 1.4 per cent discount and it has traded on a premium of up to 5 per cent and the discount was as low as 8 per cent at one point."
"There is some value compared to its historic range, but it’s not at an extreme range."
"Smaller companies have done well and I think that on average, the discount is about 14 per cent, so Standard Life is still trading at a premium to its peers."
Tuite Dalton added: "It may be because of some relative underperformance to some of its peers. Aberforth Smaller Companies had a better year last year because growth stocks did better than value stocks."
Data from FE Analytics shows that the MSCI United Kingdom Value index outperformed the MSCI United Kingdom Growth index in 2012 for the second successive year.
That trend has now reversed, however, with the Growth index up almost twice as much as the Value index year-to-date.
Performance of indices in 2013
Source: FE Analytics
In share price terms, Aberforth returned 38.82 per cent in 2012, helped by a tightening discount, while Standard Life UK Smaller Companies made 30.77 per cent.
The discount has also widened on Merchants Trust, Tuite Dalton points out – another IT UK Growth & Income trust.
It has traded on a discount between 2 and 5 per cent over the past six months, and is currently trading at 5 per cent.
The British Assets Trust is trading on a discount of 8 per cent compared with a historic range of between 9 and 2 per cent.
However, Tuite Dalton thinks the trust holds an uneasy mix of UK and global exposure, and prefers Bruce Stout’s Murray International IT, even though it is on a premium.