Top trusts that offer growth at a discount
Professional investor Alastair Laing picks three trusts where he'd put his money

Capital Gearing Trust is an investment company focused on capital preservation, seeking to grow shareholders’ real wealth through a diversified portfolio of bonds, equities and a little gold. Since 2000, the company’s net asset value (NAV) per share has grown at an annualised pace of 8.3% with low volatility and limited drawdowns.
A significant portion of our equity holdings consists of other investment trusts, which naturally raises the question of why an investment trust invests in other investment trusts. Who is the poacher and who is the gamekeeper in this arrangement?
The share price of many investment trusts trades at a discount to the NAV per share. Several factors influence that discount, and this variability offers a source of opportunity and risk. Our investment strategy seeks to identify well-managed investment trusts on discounts, where we believe the discount will narrow. At present, there are several attractive opportunities in the stock market. Here are three examples from our portfolio.
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Top trusts to invest in
Go small and go global
Smithson Investment Trust (LSE: SSON) comprises a portfolio of global small and medium-sized companies managed by Fundsmith. While large-cap companies have delivered outstanding performance over the past few years, historically, small and mid-sized firms have shown even better returns. Smithson was floated in 2018 and has performed acceptably, delivering annualised growth of 8.8% in NAV per share.
However, since 2022, the rating has fared less well as the shares have moved to a discount to NAV. We started buying the discounted shares – as did the company, which has recently started acquiring its own shares in meaningful amounts. Smithson’s recent share buybacks should enhance shareholders’ returns and help narrow the discount over time.
Tackling illiquid markets
Consider also the North Atlantic Smaller Companies Investment Trust (LSE: NAS). Investment trusts are a closed-ended fund structure that typically results in a secure pool of capital. That allows managers to pursue distinctive strategies in less liquid markets. North Atlantic Smaller Companies is a good example of a fund with a dynamic manager investing in a portfolio of small-capitalisation equities and private companies. It has an outstanding long-term record and currently trades at a discount to NAV of about 30%.
Cheap diversification
BH Macro (LSE: BHMG) is a feeder fund into a global macro hedge fund called the Brevan Howard Master Fund. Since its flotation in 2007, it has delivered an 8.3% annualised NAV return, with excellent risk control, including positive returns during the global financial crisis and the Covid-induced bear market.
However, the stability and reliability of the net assets’ growth has been undermined by significant volatility in the share price rating. The fund currently trades at a 13% discount to NAV. The company has started conducting share buybacks, which help offset the high fees and should narrow the discount over time. This is a genuine diversifier on a deep discount.
So, is Capital Gearing Trust the poacher or the gamekeeper? We think of ourselves as the latter. While we seek to exploit opportunities in discounts, we carefully limit the risks to our own shareholders through a disciplined discount-control mechanism. We ensure our share price remains within a narrow range of our NAV per share by buying back or issuing shares if there is excess demand or supply in the secondary market. It’s good to know the gamekeeper is looking out for your interests.
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Alastair Laing is co-manager of the Capital Gearing Trust
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