In this article we explain why the 3 investment trusts we discuss are trading at premiums. At a time when many trusts are being targeted by activists for trading at a discount, they represent true outliers.
WHY TRUSTS TRADE AT A PREMIUM
Investment trusts have various quirks and whether their shares trade at a discount or a premium to NAV (net asset value) is one. Here we explain how trusts can trade at a premium to NAV and highlight three trusts which tick the box.
Simply put, if the share price is higher than the NAV per share, an investment trust is trading at a premium. This means the fund is popular with investors and there is strong demand for the shares.
Conversely, if the trust’s share price is lower than the NAV per share, it is trading at a discount. This means the investment trust isn’t as popular and demand for the shares is likely weak.
Generally speaking, trusts trading at NAV premiums benefit from bumper investor demand. This may be due to the manager’s strong performance track record or the pursuit of an in-favour investment style, or ownership of unique assets.
SELECTED INVESTMENT TRUSTS AT A PREMIUM TO NAV
| Trust | Premium (%) | Dividend Yield (%) |
| 3i Group | 15.6 | 2.2 |
| Seraphim Space | 14.6 | n/a |
| Henderson Far East Income | 4.6 | 9.8 |
| Rockwood Strategic | 2.4 | n/a |
| Invesco Bond Income Plus | 1.4 | 7.1 |
| BlackRock American Income | 1.2 | 4.9 |
Source: The AIC, Morningstar, Data correct as of 26 January 2026
However, this puts investors in a quandary. If they want to invest in a premium-rated trust, they have to pay a share price which is higher than the value of the assets in the fund. This means they need to be confident the manager can continue their run of outperformance.
Investment trusts on a premium carry the risk of a de-rating. This is when a once popular trust becomes unpopular, sliding from a premium to a discount, at which point investors loses money.
The board can take advantage of confidence in the fund by issuing new shares, typically valued between the NAV per share and the prevailing share price, thereby growing the size of the fund and boosting liquidity.
According to data from the AIC (Association of Investment Companies), only 29 of the 300-plus London-listed trusts currently trade on premiums. Prominent examples include private equity giant 3i Group (III), whose 15.7% premium reflects its stake in Dutch discount retailer Action.
Others trading at premiums include Seraphim Space (SSIT) and the Richard Staveley-steered Rockwood Strategic (RKW), a concentrated portfolio of undervalued smaller companies.
Trusts focused on income also populate the premium list, which makes sense. As interest rates come down, investors are seeking trusts with long track records of dividend growth to meet their income needs.
HENDERSON FAR EAST INCOME (HFEL)
Offering a plump 9.8% dividend yield is Henderson Far East Income, the quarterly-dividend paying trust which trades at a 4.6% NAV premium. This fund looks to maximise the growing opportunities for high-income investing in the Asia-Pacific market.
Manager Sat Duhra runs a portfolio of value orientated Asia Pacific equities with a focus on cash flow generation from companies with the ability to sustain and grow dividends.
Henderson Far East Income offers exposure to advanced AI chips maker TSMC while recent performance has been helped by allocations to names including Samsung Electronics and New China Life Insurance.
Learn more about the trust here: https://www.janushenderson.com/en-gb/uk-investment-trusts/trust/henderson-far-east-income-limited/
INVESCO BOND INCOME PLUS (BIPS)
Another income favourite on a premium is fellow quarterly dividend payer Invesco Bond Income Plus. The trust aims to provide investors with confidence through reliable income and steady growth.
Investment is focused on bonds, where companies borrow money and reward investors with interest, selected for their attractive yields.
Offering a plump 7.1% yield, the portfolio is invested across three broad areas of the high yield bond market. Income generators form the core of the fund, made up of bonds issued by non-financial companies which pay a high level of income to compensate for their leveraged balance sheets.
BIPS also invests in the bonds of banks and subordinated financials, as well as in credit intensive bonds. These are bonds which have come under price pressure, but where the manager sees potential for the business to improve.
Learn more about the trust here: https://www.invesco.com/uk/en/investment-trusts/invesco-bond-income-plus-limited.html
BLACKROCK AMERICAN INCOME (BRAI)
Judging by a share price chart which goes up and to the right and a 1.1% premium, investors are excited by the new strategy at BlackRock American Income. Said strategy makes use of machine learning and computing power to analyse relevant earnings calls, analysts’ reports, news items, economic releases and social media posts.
These are built into a huge database allowing the investment team to look for both short and longer-term signals which may affect the outlookfor companies in its universe.
‘While the approach has only been applied to BRAI for the past six months,’ observes Capital Access, ‘the Systematic Active Equity team’s track record of performance on other Russell 1000 Value Index focused mandates suggests the aim of sustained incremental outperformance is achievable.’
Although the US equity market is not especially high-yielding, BRAI’s board has chosen to counteract this by rewarding shareholders with an annual payout equivalent to 6% of NAV funded from both revenue and capital reserves.
Learn more about the trust here: https://www.blackrock.com/uk/solutions/investment-trusts/our-range/blackrock-american-income-investment-trust/trust-information
Disclaimer: This content is for information only and is not investment advice. Always do your own research before investing. Click here to see full disclaimer.
