6

Discount opportunities

I have so far explained the basic characteristics of investment trusts and some of their salient features in comparison with open-ended funds. This has included their superior NAV performance which has been helped by their cheaper fees, more suitable structure and ability to gear. However, there is another characteristic which can further boost share price performance if it is embraced correctly by investors – and that relates to movements in the discount.

Chapter 1 touched on the fact that, being closed-ended and therefore having a fixed number of shares, the share price of an investment trust is not solely dictated by the underlying value of the assets under management – the NAV – but also by the extent to which ...

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