Recently FE Trustnet pointed out that the trusts run by Neil Woodford and Mark Barnett for Invesco had slipped on to significant discounts, although admittedly these are the exceptions rather than the rule.
There are a number of trusts that pay an income worth having that can be picked up for less than net asset value, although many of them have patchy records or other features that explain why they have remained on a discount. Here are four of the better ones.
Aberdeen Smaller Companies High Income
Investors can get a yield of 2.8 per cent on the £48.4m Aberdeen Smaller Companies High Income trust, currently trading on a discount of 4.6 per cent.
Winterflood’s Simon Elliott points out that this figure is close to the trust’s one-year average, although when the sector was out of favour it was trading on a much wider discount, more than 15 per cent.
Over the last three years it has made 100.56 per cent in share price terms compared with 59.8 per cent from the average UK High Income trust.
Performance of trust vs sector and index over 3yrs
Source: FE Analytics
However, the FTSE Small Cap Index (ex IT) has made 69.52 per cent in this time and the NAV gains on the trust are 70.3 per cent, more or less in line with the index.
"The story here is small caps have been a good place to be, the Aberdeen team have done very well and the trust has been re-rated on the back of it," Elliott said.
He points out that the trust has a good record of growing its dividend too, which makes it attractive for income seekers.
The portfolio is managed by Susan Anderson and Phil Webster. It has ongoing charges of 1.92 per cent.
Shires Income
This £72m Aberdeen-run trust's top holding is actually Aberdeen Smaller Companies High Income, at 8.5 per cent of its assets.
The rest of its top-10 is made up of more stable large cap stocks: Vodafone, Shell, BAT and Centrica feature high up on the list.
It is available on a discount of 2.5 per cent, with a healthy yield of 5 per cent, according to the AIC.
Over three years it has marginally underperformed the IT UK Growth & Income sector, with returns of 51.97 per cent to the sector’s 55.45 per cent. NAV returns were 54.6 per cent and the FTSE All Share made 36.56 per cent.
Performance of trust vs sector and index over 3yrs
Source: FE Analytics
The trust, managed by Ed Beal, has ongoing charges of 1.08 per cent.
British Assets
The £412m British Assets trust is managed by Phil Doel for F&C. It is currently yielding 4.4 per cent, the highest figure in the IT Global Growth & Income sector, but is still on a discount of 3.6 per cent.
It is largely an equity fund, with 66.99 per cent in the asset class, but it also has 9.47 per cent in corporate bonds and 15.31 per cent in global high yield. The trust has 6.54 per cent in global emerging markets.
It measures itself against a benchmark of 80 per cent in the FTSE All Share and 20 per cent in the FTSE World (ex UK).
The trust has underperformed against this benchmark over the past three years, according to our data.
In share price terms it has made 27.31 per cent while the benchmark has made 36.54 per cent. In NAV terms its gains were 31.9 per cent. The IT Global Growth & Income sector has made 45.03 per cent.
Performance of trust vs sector and index over 3yrs
Source: FE Analytics
Performance has been slightly ahead of the benchmark over the last year, however.
The trust has ongoing charges of 0.72 per cent.
Value & Income
This £123m trust is run by Angela Lascelles and Lib Dem peer Matthew Oakeshott. The latter is also the trust’s largest shareholder, controlling 11.6 per cent of the company.
The trust is trading on a wide discount of 11.4 per cent. This has been much wider in the past though, with an average figure of 17.6 per cent.
The trust is less liquid than many others in the sector, with one of the widest bid/ask spreads and relatively few shares in existence.
One of the other reasons it has traded on a wide discount could be the high weighting to property, which made up 27 per cent of the fund in March.
Performance of trust vs sector and index over 3yrs
Source: FE Analytics
Large equity holdings include FTSE 250 companies Rotork, Spectris and Babcock.
Ongoing charges are 1.43 per cent before the performance fee and amounted to 1.54 per cent in total last year.
