Widening discounts could provide bargain
J Morgan Asset Management has highlighted the availability of cheap investment trust purchases in the current volatile market.
According to the fund manager, discounts for investment trusts (the difference between the value of the underlying fund and the cost of investing) have widened, providing some very attractive opportunities to buy. It also pointed out that such wide discounts are more closely related to market sentiment and not necessarily an indication of reduced underlying value.
Discounts on some JPMorgan Asset Management investment trusts are around 10-15% despite the fact the underlying value (the value of the shares held by the fund) of the investment trust is much higher. For example, JPMorgan American Investment Trust is currently trading at a discount of around 9% and a share price of 633p, while the net asset value is 697p.
James Saunders Watson, head of sales and marketing for investment trusts at JPMorgan Asset Management, said: “The prospect of buying a share at a reduced rate is very appealing. For instance, purchasing £1 of assets for 85p is something that should be attractive to most investors.
“Obviously there is a risk implied in that a discount could widen further, but the underlying value of the share is likely to remain unchanged. Investment trusts are designed to be long-term investments, so the case in favour of buying at a discount now means over the medium- to long-term returns are expected to be heightened.”