Investment trust discounts

Crazy_Diamond

I am a bit confused by the level of discounts on some investment trusts and wondering if anyone can enlighten me.

I had assumed that they would be based on the popularity and performance of the trust however in some cases the trust seems to have had really good performance and is in a popular sector but has had a huge increase in its discount.

One example is Aberforth Geared Income Trust (which invests in UK smaller companies) which over the last year has grown 69% but had its discount move from +15 to -10 http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=J2FB1&univ=T&pagetype=performance#disc
Any idea why the discount would have increased so much?

kidmugsy

One reason could be that it has taken on a lot of borrowings; you could check for that. Or has there been a change of management? Or maybe a major shareholder sold his holding to realise his gains. Or maybe some sort of take-over plan failed.

Reaper

Crazy_Diamond wrote: »

One example is Aberforth Geared Income Trust (which invests in UK smaller companies) which over the last year has grown 69% but had its discount move from +15 to -10 http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=J2FB1&univ=T&pagetype=performance#disc
Any idea why the discount would have increased so much?

It hasn't according to the link you provided. Over the last year its discount has not changed at all. On the discount chart be sure to alter the time period to 1 year if that is what you are checking.