UK investment trusts aren't screamingly cheap at present but there are still some true bargains to be had for investors looking down the discount aisle.
The UK is a microcosm of the wider investment trust universe, with share price discounts narrowing in recent months.
Indeed, data from the Association of Investment Companies (AIC) found the average discount reached single digits (9.6%) for the first time in nearly four years at the end of May, half the peak of 18.8% in October 2023.
Richard Stone, chief executive of the AIC, said: "It has been a challenging period for investment trusts but there is light at the end of the tunnel. The sector has reshaped itself over the past four years with unprecedented levels of M&A and share buybacks, as well as mandate changes and fee cuts to give shareholders a better deal.
"While the challenges are not over yet, it's encouraging to see that the average industry discount is now back in single digits."
In this new series, Trustnet looks at the current share price discounts or premiums of trusts versus their own five-year historic average. This shows investors whether these funds are cheap or expensive relative to what investors have typically paid in the past.
The average trust discounts in the IT UK All Companies, UK Equity Income and UK Smaller Companies sectors are all narrower today than their historic five-year averages, data from the AIC shows.
Investors have become more positive on the UK in recent years as the market has staged a comeback thanks to rising energy prices aiding oil majors and higher interest rates boosting banks and other financial groups. But some have slipped through the net.
| The cheapest UK trusts relative to their own history | ||||
| Trust | Sector | Discount at end of May | 5-year average discount | Difference |
| Oryx International Growth | UK Smaller Companies | -32.3% | -23.3% | -9.1% |
| Rights & Issues Investment Trust | UK Smaller Companies | -18.9% | -13.9% | -5.0% |
| Odyssean Investment Trust | UK Smaller Companies | -4.1% | 0.5% | -4.6% |
| Merchants Trust | UK Equity Income | -4.3% | -1.4% | -2.9% |
| Marwyn Value Investors | UK Smaller Companies | -46.7% | -44.7% | -2.0% |
Source: AIC, Morningstar. Individual trust data for companies with a market cap above £100m.
In particular, smaller companies remain out of favour. While the FTSE 100 has climbed 76.2% over five years, the FTSE 250 and Deutsche Numis Smaller Companies indices are up just 19.5% and 14.3% respectively.
Of the five trusts trading at a two-percentage point wider discount than their long-run average, four come from the IT UK Smaller Companies sector.
Oryx International Growth is the cheapest. It's 32.3% share price discount to net asset value (NAV) is some 9.1 percentage points wider. The £256m UK smaller companies trust is managed by Chris Mills at Harwood Capital.
Its shares were on a 32.3% discount as of the end of May 2026,versus the trust's five-year average of 23.3%. The sector average discount currently stands at just 10.7%, making this half the price of its peers.
The trust has lost investors 26.9% over the past five years, although it has doubled investors' cash over the past decade, enjoying a strong run from 2018-2021.
Rights & Issues, managed by Jupiter's Matthew Cable, is the second-biggest bargain when compared with its own history. Its 18.9% discount is 5 percentage points wider than its average.
Earlier this year, the board reinstated its share buyback programme after shareholders approved the proposition at its annual general meeting. The same proposal had been blocked the previous year.
Odyssean Investment Trust (4.6 percentage points wider) and Marwyn Value Investors (two percentage points) round out the smaller companies trusts in the top five.
Merchants Trust is the only non-small-cap trust more than two percentage points wider than its history (2.9 percentage points).
It has been a top-quartile performer in the IT UK Equity Income sector over 10 years, although it has slipped below the average peer over one and three years.
Run by Simon Gergel since 2006, it remains on a relatively narrow discount of 4.3%, although this is wider than its average 1.4% and the sector's 1.9%.
Aidan Moyle, investment analyst at Hargreaves Lansdown, said those interested in the trust could look to use it "as part of an income-focused investment portfolio or to add larger UK companies' exposure to a broader, diversified portfolio".
Not everything, however, is cheap. Indeed, many trusts are more expensive than their recent history after the improved performance of domestic stocks.
| The most expensive UK trusts relative to their own history | ||||
| Trust | Sector | Discount at end of May | 5-year average discount | Difference |
| Temple Bar Investment Trust | UK Equity Income | 1.5% | -4.9% | 6.4% |
| Schroder UK Mid Cap Fund | UK All Companies | -4.7% | -10.7% | 6.0% |
| Diverse Income Trust | UK Equity Income | 0.2% | -5.5% | 5.7% |
| Fidelity Special Values | UK All Companies | -0.1% | -4.8% | 4.6% |
| Rockwood Strategic | UK Smaller Companies | 2.0% | -2.5% | 4.6% |
Source: AIC, Morningstar. Individual trust data for companies with a market cap above £100m.
Temple Bar Investment Trust has been the biggest beneficiary, moving from an historic discount of 4.9% on average to a premium of 4.5%.
Schroder UK Mid Cap (six percentage point difference), Diverse Income Trust (5.7), Fidelity Special Values (4.6) and Rockwood Strategic (4.6) round out the top five that could be considered more expensive based on their own history.
All are now on a premium apart from Schroder UK Mid Cap (4.7% discount) and Fidelity Special Values (0.2%).