The number of investment companies trading at year-high discounts to net assets almost doubled to 18 week ended Friday 22 November 2024. The two themes observed in recent weeks – rising gilt yields affecting alternative assets funds; and Trump’s victory in the US election impacting funds investing in emerging markets – still in evidence.

ByFrank Buhagiar 25 Nov

We estimate 18 investment companies saw their share prices trade at 52-week high discounts to net assets over the course of the week ended Friday 22 November 2024 – eight more than the previous week’s 10.

Two themes highlighted in recent Discount Watches still very much in evidence during Week 47 of the year.

Funds from the alternative assets space continue to feature prominently among the 52-week high discounters. Eight out of the 18 funds were alternatives. Concerns over government spending and borrowing have seen 10-year gilt yields spike up to as high as 4.5% from the 3.75% seen in September. Higher yields can lead to higher discount rates. Higher discount rates used to value alternative assets can result in lower fund valuations. Having said that, the number of alternative year-high discounters in Week 47 matched the previous week’s eight – a sign the gilt yield theme is waning or just taking a breather?

Widening discounts in the emerging/frontier markets sector reflect fears that Donald Trump’s victory in the US election is bad news for developing nations’ economies due to the prospect of a stronger dollar, higher US inflation/interest rates and higher tariffs on imports into the US. This week, three funds investing in developing , Utilico Emerging Markets (UEM), Vietnam Enterprise (VEIL) and VinaCapital Vietnam Opportunities (VOF) feature in the Disco Watch. No surprise two of these are Vietnam-focused as the country is among the largest exporters to the US and therefore potentially has much to lose.

As for the remaining seven funds on the list, these come from a random walk of sectors – healthcare, equity income (global and UK), environmental, North America and flexible.

The top five

Fund	Discount	Sector
HydrogenOne Capital Growth HGEN	-76.04%	Renewables
Ceiba Investments CBA	-74.43%	Property
Gore Street Energy Storage GSF	-52.40%	Renewables
VPC Specialty Lending Investments VSL	-48.29%	Debt
Syncona (SYNC)	-44.57%	Healthcare

The full list

Fund	Discount	Sector
VPC Specialty Lending Investments VSL	-48.29%	Debt
Utilico Emerging Markets UEM	-21.57%	Emerging Markets
Impax Environmental IEM	-15.02%	Environmental
New Star IT NSI	-40.30%	Flexible
Global Opportunities Trust GOT	-26.16%	Flexible
Scottish American SAIN	-11.22%	Global Equity Income
Syncona SYNC	-44.57%	Healthcare
Third Point Investors TPOU	-27.11%	Hedge Funds
Pershing Square Holdings PSH	-36.26%	North America
Tritax Big Box BBOX	-27.07%	Property
Ceiba Investments CBA	-74.43%	Property
Gore Street Energy GSF	-52.40%	Renewables
Foresight Environmental Infrastructure FGEN	-33.09%	Renewables
Renewables Infrastructure Group TRIG	-25.90%	Renewables
HydrogenOne Capital Growth HGEN	-76.04%	Renewables
Murray Income MUT	-13.06%	UK Equity income
VinaCapital Vietnam Oppunities VOF	-25.87%	Vietnam
Vietnam Enterprise VEIL	-23.51%	Vietnam

ke passive income: five ideas

Telegraph Money

Story by Esther Shaw

Woman looking at charts on her laptop

If you’re looking for a way to generate some extra cash, then you might like the idea of earning some “passive income”.

Here, Telegraph Money explains what passive income is and gives some examples of how you could make it.

• What is passive income?
• How to make passive income
• Five passive income ideas
• Passive vs active income
• Passive income FAQs

What is passive income?

Passive income refers to a source of money you earn that you don’t have to actively work for. That’s not to say that you won’t need to put in some serious time and effort in the beginning to set it up, but once that’s done it should continue to provide you with an income that’s separate from your job.

Megan Rimmer, chartered financial planner at Quilter Cheviot, said: “Passive income refers to earnings generated from sources that require minimal involvement once they’re set up.”

Traditionally, there have been a handful of options for generating passive income, notably property and investment.

These are still popular but tend to require you to put up more money to start things off

More recently, all sorts of people from different age groups and income groups are coming up with increasingly creative ways of making passive income.

How to make passive income

While a passive income stream can be pretty easy once it’s set up, it does require a lot of planning and preparation beforehand.

You could well have more than one source of passive income, but you’ll need to have a think about which methods will suit you and bring in enough money to be worth the initial effort.

Here are some things you’ll need to consider first:

• Be prepared to put in effort and capital upfront: Whether you’re planning to invest in a property or set up a side hustle, passive income requires input at the start.
• Be willing to accept risk: Given the effort and capital required, there’s no guarantee the income you’ll receive (if any) will be enough to outweigh what you put in.
• Have other sources of income: Making sure you’re not dependent on passive income will help mitigate the risk while you’re setting it up – so, continue with your job, or make sure the set-up costs don’t take up too much of your pension, for example.
• Consider your personal circumstances: Remember, the right passive income approach for you will depend on your timescales, personal circumstances and risk appetite.

Five passive income ideas

There are lots of options for making passive income – some will depend on how comfortable you are, or whether you have a creative talent that people might pay for.

Here, we detail some of the ways to make passive income that could be considered by almost anyone.

1. Investing in stocks and funds

This tax efficiency has grown even more important given the announcement in the recent Budget of a reduction in the capital gains tax allowance.

Ms Rimmer said: “This highlights the benefits of an Isa for those seeking to grow passive income without being taxed heavily.”

You just need to bear in mind that investments also carry their own risks and are subject to fluctuations. This underlines the importance of having a diversified portfolio.

2. Prioritise dividend-paying stocks

More specifically, look into putting a lump sum into stocks or funds that pay a dividend. This is a distribution of earnings to shareholders from the company they’re invested in, which tend to be paid quarterly – and you can usually choose to receive it in cash. If you choose to do this, you won’t benefit from the compound interest of other investing income, but it is an easy way to arrange a regular source of income.

Unless the investments are held in an Isa, you’ll pay tax on dividend income above £500 in 2024-25.

3. Rental income

Investing in property was once a popular way to generate passive income through buy-to-let arrangements. However, recent tax and regulatory changes mean it’s not so easy to make big profits – including the removal of mortgage interest relief and the 5pc stamp duty surcharge on second homes.

Ms Rimmer said: “Such moves have made it much harder to turn a profit in this space. While some landlords may still succeed, it’s now a much riskier and more complex path.”

If you don’t have a second home, but do have spare room, taking in a lodger is another option. Under current rules, you can earn up to £7,500 a year letting a furnished room without having to pay tax on it. This is thanks to the “rent-a-room” scheme.

If you earn more than this, you are required to complete a tax return.

You might also choose to rent out your parking space or any other space for storage. Note that you get up to £1,000 each year in tax-free allowances for property income.

4. REITs

If you’re not keen on investing in a physical property, a real estate investment trust, or REIT, might be a better way to capitalise on the sector.

REITs are closed-ended funds, which have a fixed pool of capital that is not affected by investors buying and selling. This protects them from the issue of “liquidity mismatch”, when managers are unable to fulfil redemptions if investors rush to cash out – as was seen during the Covid pandemic.

5. Savings interest

Simple as it sounds, earning interest on savings is a form of passive income.

The key here is to look around for the highest rates you can find, as this will mean you’re making the most of your hard-earned cash.

To keep a stream of money coming in, you could set up a “bond ladder”. This involves splitting up your savings into several groups and depositing each one into a bond that is due to mature at a slightly different time – you could split them out to give yourself a payout once a year, or more often if you’re willing to keep track of lots of accounts.

When each bond matures, you can “pay yourself” the savings interest, and then re-invest the money into a different account, and so on.

Passive vs active income

Passive income is defined as income derived from a source which you play no role – or only a very minimal role – in obtaining.

David Hunter, wealth planner at Succession Wealth, said: “It can be further characterised by its flexibility because it does not require active participation, allowing you additional freedom.”

This contrasts with active income, which needs ongoing time and effort.

Mr Hunter said: “This involves you playing a more pivotal role – such as employment or self-employment. The main difference being that if you were to stop the activity, the income would also likely stop.”

Passive income FAQs

Can you make a living out of passive income?

Yes, you can – and lots of people do.

Many people in Britain live a life that is entirely funded by passive income streams.

But be under no illusion. Almost every venture requires a huge level of work and effort to get going.

You only get to reap the rewards and collect income “passively” a lot further down the line, so don’t be too hasty about throwing in the towel on the day job.

A sensible approach is to start your passive income venture as a side hustle. That way, you’ll have the security of a regular income while you work out whether you can get it off the ground.

Is it hard to make passive income?

While passive income can provide financial freedom by de-linking earnings from hours worked, it’s rarely as simple as it sounds.

Creating meaningful returns generally requires upfront effort, capital and a willingness to accept risk – especially with avenues such as property and stock markets, as both can fluctuate.

Ms Rimmer said: “In this respect, building passive income often requires a carefully planned approach that accounts for risk – and aligns with long-term financial goals.”

You also need to tread very carefully online.

Jason Witcombe, chartered financial planner at Empower Partners, said: “As passive income can be presented as trying to generate ‘money for nothing’, it’s no surprise that the internet is full of advice on passive income ‘side hustles’ or ‘get-rich-quick’ schemes. Just be careful who you believe, otherwise you could find yourself being someone else’s passive income.”

What passive income makes the most money?

Sadly there is no simple answer to this.

Mr Witcombe said: “There are ‘infinite’ ways you can generate a passive income – so it’s impossible to say which is ‘best’.”

The most sensible approach is to research the various ideas carefully to see which ones might work well for you. Always go in with your eyes open, fully aware not only of the rewards on offer – but also of the potential risks involved.

Don’t base your decision on what has worked for other people – you need to consider your own situation.

Not naval gazing, that’s a different topic altogether.

2025

The current dividends pencilled in for the next calendar year is £9,004.00, subject to change. Below the fcast of £9,120.00 but as the earned dividends are re-invested the fcast should be met. But remember there is a lot of water to flow under a lot of bridges before the end of 2025. GL

Dividend progression

2015        6.00p

2016        6.05p

2017        6.14p

2018        6.31p

2019        6.51p

2020        6.66p

2021        6.76p

2022        6.80p

2023        7.14p

2024        7.57p

2025        7.80p¹

1.    This is a target only, there can be no guarantee this target will be met.

2.    Note: Past performance cannot be relied on as a guide to future performance

Dividends received to date £9,615.00

Cash for re-investment £415.00

Thursday 28 November

3i Group PLC ex-dividend date
Alliance Witan PLC ex-dividend date
AVI Global Trust PLC ex-dividend date
BlackRock World Mining Trust PLC ex-dividend date
Fidelity Special Values PLC ex-dividend date
Land Securities Group PLC ex-dividend date
Pacific Horizon Investment Trust PLC dividend payment date
Premier Miton Global Renewables Trust PLC ex-dividend date
Worldwide Healthcare Trust PLC ex-dividend date

I have to take a short break from the blog and there will not be any updates until early next week.

The story to date.

The Snowball commenced on 9 Sep 2022. I previously had a similar portfolio posted on a forum which achieved its target ahead of the plan and was then closed for any further updates.
The Snowball’s initial plan was to have a portfolio that returned 5% and with a bit of trading to double the income within ten years.
Since then discounts have widened and as the price falls the yields rise so the plan’s yield is now 7% plus.

2023 Income earned  £9,442.59
2024 Income to date £9,158.00

The comparable targets were

2023 £7,490.00
2024 £8,014.00
2025 £8,575.00

Current fcast for 2024 income is £10,791.00

Next year’s fcast of £9,120.00 and the target of £10,000.00 remains unaltered.

If you have longer than ten years the ‘magic’ of compounding starts to really increase. If you compound at 7%, your income doubles every ten years. If we take this year’s target of 10k, in 20 years time that would equal 40k, a yield on seed capital a yield of 40%.

If you compound your dividend income at 7% it doubles in ten years but one word of realism, when you start to compound your dividends it takes several years before the amount of income starts to accelerate but the sooner you start to compound the sooner that day arrives.
The current Snowball is an accumulation portfolio where you can take more risks as you have time to correct any clunkers.
A de-accumulation portfolio would probably be investing in lower yielding ‘safer’ dividend shares as you move towards that day.

If you have a plan, stick to the plan until it sticks to you, as many people will find out sooner than later that markets never go up forever and the higher they rise the further they are likely to fall.
If in future you are unable to re-invest at 7% or higher there are several options, like share pair trading or buy a tracker where if you can choose the date to sell, you will not lose any of your hard earned.
But I guess that day is a fair way away. GL

Ed Warner, Chair of FGEN, said:

“FGEN’s half-year results reflect both progress and challenges. While the full write-down of our investment in HH2E impacted overall performance, outside of this our diversified portfolio of sustainable infrastructure assets performed well, delivering record cash distributions and solid dividend cover. During the period, we were pleased to achieve the sale of a majority stake in six anaerobic digestion facilities, to launch our first share buyback programme, and to receive shareholder endorsement of a name change to Foresight Environmental Infrastructure Limited. Additionally, early reductions in UK interest rates provide cautious optimism for a more favourable macroeconomic outlook.

“We remain committed to disciplined capital allocation in the near term, progressing our construction stage assets and delivering other value enhancements across the portfolio. Longer term we are well positioned to take advantage of the significant investment opportunity presented by the commitment to decarbonisation and sustainable development when the wider environment supports it.”

FGEN has announced an interim dividend of 1.95 pence
 per share for the quarter ended 30 September 2024, payable on 27 December 2024.

Dividend timetable

Ex-dividend date:  5 December 2024

Record date:          6 December 2024

Payment date:        27 December 2024

Our track record

Dividend progression

2015        6.00p

2016        6.05p

2017        6.14p

2018        6.31p

2019        6.51p

2020        6.66p

2021        6.76p

2022        6.80p

2023        7.14p

2024        7.57p

2025        7.80p¹

1.    This is a target only, there can be no guarantee this target will be met.

 Helen Mahy, Chairwoman of NextEnergy Solar Fund Limited, commented:

“NESF has remained proactive through its capital recycling and buyback programmes over the period, both of which have made good progress.  Shareholders signalled their confidence in NESF at its recent Annual General Meeting in August with c.94% of votes cast ‘Against’ discontinuing the Company in its current form, the strongest result in the renewable investment company sector this year and demonstrating that shareholders continue to support the Company’s ongoing strategy.”

“The Company remains committed to narrowing the ordinary share discount and is focused on delivering shareholder value now and long into the future.  This includes currently offering shareholders an attractive dividend yield of approximately 11%.”

Dividend:

·     Total ordinary dividends paid since IPO of £370m or 72p per ordinary share.

·     The Company remains on track to deliver its target dividend of 8.43p per ordinary share for the financial year ending 31 March 2025.

·     Dividend cover for the six months ended 30 September 2024 was 1.5x (31 March 2024: 1.3x).

·     Forecasted target dividend cover of 1.1x – 1.3x for the financial year ending 31 March 2025.

·     As at 20 November 2024, the Company offers an attractive high dividend yield of c.11%.