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
-
How inheritance tax trick is helping families save ‘six-figure sums’
Happy to skip a generation to save thousands on inheritance tax? A deed of variation could be the estate planning tool you need.
-
Nationwide: House prices unexpectedly dropped in August
House prices fell by 0.1% in August in a surprise drop, according to Nationwide, as “affordability remains stretched”
-
Are wealthy whisky enthusiasts leaving Britain?
Collectables Wealthy whisky enthusiasts are heading to tax-friendly countries such as Dubai, where there is more disposable income to spend on collectable luxuries like rare whisky.
-
'The rise and fall of Kodak is a lesson for the tech giants'
Opinion The long decline of Kodak – a once-dominant company – shows why no business is safe from disruption, says Matthew Lynn
-
8 of the best properties for sale with kitchen gardens
The best properties for sale with kitchen gardens – from a 17th-century timber-framed hall house in Norfolk, to an Arts & Crafts house in West Sussex designed by Charles Voysey with a garden by Gertrude Jekyll
-
Why investors can no longer trust traditional statistical indicators
Opinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
Investors rediscover the virtue of value investing over growth
Growth investing, betting on rapidly expanding companies, has proved successful since 2008. But now the other main investment style seems to be coming back into fashion.
-
8 of the best properties for sale with shooting estates
The best properties for sale with shooting estates – from an estate in a designated Dark Sky area in Ayrshire, Scotland, to a hunting estate in Tuscany with a wild boar, mouflon, deer and hare shoot
-
The most likely outcome of the AI boom is a big fall
Opinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
What we can learn from Britain’s "Dashing Dozen" stocks
Stocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?