A trust that trades at a discount to net asset value (NAV) of 15% or more may represent a great opportunity to buy into a thesis that is out of favour, a good long-term manager going through a tough patch, or just a market in the doldrums. A return to form by the manager, a return to favour by the sector, or an increasingly optimistic outlook by investors promises outsized returns as the discount narrows.
But when the discount is more than 30%, investors should be
