Three top investment trusts the market has overlooked
Professional investor Richard Parfect of Seneca Investment Managers selects three investment trusts that he thinks have been mispriced by the wider market.
When assessing investment trusts’ holdings it is important to understand the fundamentals underpinning the net asset value (NAV), the value of the fund’s portfolio, while also keeping in mind that sentiment affects prices and determines whether the trust trades at a premium or a discount to its NAV.
Not all premiums and discounts are warranted, however. Investors can achieve powerful returns when they inspect the trust’s assets closely and come to appreciate that there is value in the portfolio mispriced or misunderstood by the wider market. Three examples can illustrate this situation.
Retail parks are a bargain
Retail property is a busted flush, right? Not so fast. Retail parks have performed well in terms of footfall and their tenants (such as Aldi, M&S Food, Halfords, Pets at Home, B&Q, Costa) have remained open as they are deemed to be essential services. Ease of parking, open spaces and low rents (less than £15 per square foot) combine to offer customers and tenants an attractive place to shop.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That makes Ediston Property Investment Company (LSE: EPIC) worth a look. This real-estate investment trust (Reit) boasts solid rent collection and an efficient record of replacing struggling tenants with a company voluntary arrangement (CVA), whereby at least some of the debt is paid back.
Ediston’s impressive performance has underpinned a dividend, which will need to be increased from the current 4p a year in order to protect its status as a Reit. A discount to NAV of 23%, despite a bounce in the share price after vaccines were discovered, still looks excessive given the strength of the company’s management.
An undervalued turnaround specialist
AEW UK Reit (LSE: AEWU) has demonstrated an excellent asset turnaround strategy in the first five years of its life and offers a high dividend yield of 8% based on the share price at its initial public offering (IPO). Yet the shares are on a discount to NAV of 14%, which looks too high.
The management pursue a deep-value strategy when purchasing property assets that are often overlooked by institutional investors. They focus on possible alternative uses, agree new leases with new or existing tenants, and potentially sell at a substantial profit.
The most recent example was the sale of Sandford House, a government-occupied office in Solihull, for £10.5m compared with a purchase price of £5.4m. This was in addition to receiving an income yield of 9.6% during the period of ownership.
Profiting from private companies
Chrysalis Investments (LSE: CHRY) offers a concentrated portfolio of owner-managed, fast-growing private firms. It has been able to make a profitable part-sale of Transferwise, the online money-transfer service.
It has also seen one of its largest positions, e-commerce platform The Hut Group, successfully list on the London Stock Exchange, with the shares surging from their 500p listing price. Investors have been impressed by the substantial growth of its online delivery platform and several bolt-on acquisitions.
Estimates of the trust’s NAV place it above 170p. The shares currently sit on a premium at around 190p. However, given the momentum in a number of the underlying firms, such as Starling Bank and Graphcore, it looks well-deserved.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Richard Parfect, fund manager at Momentum Global Investment Management
-
Landlords forecast to exit BTL market in droves – has the exodus started?
Smaller landlords are selling up in their tens of thousands, according to brokers, findings echoed by higher capital gains tax receipts on property. Is the era of the amateur landlord over?
-
Klarna IPO: how did the Swedish fintech perform on debut?
Klarna’s shares made a fast start following the BNPL company’s New York debut, but momentum waned later on. Should you invest in Klarna shares?
-
'Where to find the world’s hidden gems offering durable growth and value'
Opinion Joe Bauernfreund, chief executive officer and chief investment officer, AVI Global Trust, highlights three businesses where he'd put his money
-
What are wealth taxes and would they work in Britain?
The Treasury is short of cash and mulling over how it can get its hands on more money to plug the gap. Could wealth taxes do the trick?
-
UK bank stocks are no bargain – here's a safer alternative
Opinion Britain's banking sector faces severe political risks. Switch into this global financials trust instead, says Max King
-
Gold mining stocks outperform gold – can it last?
Opinion Gold miners are shining brighter than the yellow metal for the first time in this cycle. Enjoy the ride while it lasts, says Cris Sholto Heaton
-
The AI barons call time on the bubble
Opinion OpenAI's Sam Altman and other tech giants are warning that the AI boom is reaching dangerous territory. They may end up as the authors of their own demise
-
Three small companies with big potential
Opinion Nish Patel, portfolio manager of The Global Smaller Companies Trust, picks three small companies where he'd put his money
-
Automatic Data Processing is making big profits from organising offices – should you invest?
Automatic Data Processing has established itself as a one-stop shop for managing the workplace. Is it a sound long-term investment?
-
Crypto mogul Do Kwon pleads guilty to fraud
South Korean entrepreneur Do Kwon, who used to call critics cockroaches, faces a long spell in jail after pleading guilty to fraud relating to the collapse of two digital coins