The average investment company traded at a discount of 16.9% at market close on 31 October 2023 – the widest discount for a month-end since December 2008 when the world was in the depths of the global financial crisis.
On the last day of December 2008 the average investment company discount was 17.7%, according to the Association of Investment Companies (AIC).
The average discount started to widen at the beginning of 2022, when inflation and interest rates began to climb and war broke out in Ukraine. By the end of 2022 it had hit 12.5%.
Average industry discounts have to be interpreted with caution, as some underlying assets of investment companies are valued less frequently. This means that the discount for the end of October is likely to be revised in future, as new valuations become available.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Investment companies have faced a number of headwinds including higher inflation and interest rates as well as unhelpful regulation.
“However, history shows us that current discounts could represent a buying opportunity. When discounts were last this wide at the end of 2008, the average investment company returned 39% over the next year and 119% over the next five years. The increasing presence of activist investors on investment company share registers shows that some, at least, recognise the value in the sector.”
