Discounts in these sectors have narrowed dramatically and in some cases even premiums are in place, said Peters, making many trusts in these areas appear expensive.
"Given this data," he said, "Now is definitely a time on discounts to switch into open ended funds."
Tom Tuite-Dalton, analyst at Oriel Securities, has published a list of the cheapest and most expensive trusts on the market today, among which the F&C Global Smaller Companies trust in particular was highlighted as a costly investment.
"It is trading at a one per cent premium versus a range of 14 per cent discount to one per cent premium over the last six months," said Tuite-Dalton.
Performance of F&C Global Smaller Companies vs sector over 6-mths
Source: Financial Express Analytics
Demand for the trust has been high in part thanks to its strong performance. Financial Express data shows the fund has significantly outperformed its IT Global Growth sector in the period.
Table showing expensive investment trusts on a relative discount basis over 6-mths
| Investment Trust |
Current discount/premium (%) |
| Henderson Opportunities |
17.8 |
| F&C Global Smaller Companies |
2.8 |
| European IT |
12.9 |
| Edinburgh UK Tracker |
4.3 |
| Henderson Smaller Cos |
16.3 |
| Melchior Japan |
10.9 |
| Scottish American |
2.7 |
| Murray International |
8.3 premium |
| Aberforth Smaller Cos |
10.8 |
| Herald IT |
17.7 |
| Law Debenture |
4.6 premium |
| Dunedin Income Growth |
3.3 |
Data to 18 August 2010
Healthcare and property investment trusts, meanwhile, look cheap in discount terms, compared to their historic average, according to Tuite-Dalton.
Table showing cheap investment trusts on a relative discount basis over 6-mths
| Investment Trust |
Current discount/premium (%) |
| TR European Growth |
17 |
| Jupiter Green |
18 |
| JP Morgan American |
3 |
| SVM Global |
18 |
| Gartmore Growth Opportunities |
6 |
| Henderson Financial Opportunities |
16 |
| Henderson Global Property |
12 |
| Schroder UK Growth |
8 |
| Fidelity Asian Values |
10 |
| Schroder Asia Pacific |
10 |
| Worldwide Healthcare |
9 |
| Baillie Gifford Shin Nippon |
13 |
Data to 18 August 2010
The trust's "Z Scores", used by analysts to determine relative value, show healthcare and property trusts dominating in a table of cheap funds but analysts warn against taking too simplistic an approach to judging value.
"Property trusts are looking cheaper than they have done for a while, but there are underlying issues in investing there, specifically that the rental growth market is very stagnant," said James Brown, investment trust analyst at Winterflood Securities.
Tuite-Dalton points to Henderson Global Property as a cheap trust in the property universe, but Brown favours the ING UK Real Estate Investment Trust. He says it looks attractive because it is trading at a 20 per cent discount, and has a covered dividend.
Performance over 1-yr
Source: Financial Express Analytics
The two funds are in different AIC investment trust sectors, so it is difficult to make a direct comparison. However, over a one year period, the ING company has returned more to investors than Henderson Global Property. The former invests in commercial UK properties such as the office building Lincoln Place, on Farringdon Road in London, and a business park in Colchester. Henderson Global Investors, meanwhile, invests in equities. It has Westfield Group and CFS Retail Property Trust in its top ten holdings.
"Henderson Global Property's [13 per cent] discount looks anomalous, especially given the attractive prospective income and global diversification that the fund offers," said Tuite-Dalton said.
Meanwhile, Brown says healthcare is the more interesting sector for investors.
"The sector is very valid, and has very low valuations compared to the past. There is a good story behind it too; that of an aging population, a global expansion into emerging markets, and reduced spending on research and development," he said.
Both Brown and Tuite-Dalton point to Worldwide Healthcare, which is trading at a discount of nine per cent, as good value.
"Its fair value ex-income discount to NAV looks good against a six month range of 12 per cent to five per cent," said Tuite-Dalton. Peters, however, warns that currency could impact on the fund.
"Worldwide Healthcare is cheap, but it has struggled of late as pharmacy has not performed that well. Dollar weakness since May versus sterling has been a drag too," he said.