Ryan Lightfoot-Aminoff, investment trust research analyst at Kepler Partners, explained that while discounts allow investors to buy a portfolio of assets below its stated value, they “must be viewed in context”.
Drawing a comparison over a trust’s own history can be an efficient way to understand changes over time, as well as compare it with long-term averages, he noted.
Discount scales should also be applied, as some discounts may be “wide statistically versus their own average, but a narrowing of the discount as it returns to mean, or even better narrower, may only add a few percent…
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