The investment trust sector has long been part of the UK market. The first trust entered the market in 1868 and the Association of Investment Companies was founded in 1932. Investment trusts have certainly evolved and the market in which they invest in has changed too.
In 1999, there were 334 trusts, 88% of underlying holdings were equities, and 12% were in alternative assets (private equity). There is now around 365, and more recent numbers show that the split is more like 54% equities to 46% alternatives (this includes, private equity, property, and infrastructure). Debt funds are around 3% and VCTs are ~2%. Total assets of investment trusts were around £78billion in 1999, but at the end of 2025 it was £265.5billion.
The first investment trust to enter the UK’s largest index was the Edinburgh Investment Trust in 1986. By 1999 there were four trusts in the index. Like many other companies, trusts have come in and out of the UK 100. As of April 2026 the number of trusts in the UK top 100 index has reached a record high with seven trusts now part of the list. Investment Companies in the 100 today are 3i Group, Scottish Mortgage, Pershing Square Holdings, F&C Investment Trust, Alliance Witan, Polar Capital Technology, and Tritax Big Box REIT.
The newest addition was Tritax Big Box REIT. The UK REIT invests in warehouses and distribution centres and is beginning to focus on investments in data centres.
There is a much higher proportion of trusts in the 250 index– there are now 92 trusts compared with only 38 in 2002. So today trusts account for nearly 37% of constituents in the 250. (don’t worry I won’t name them all.)
Discounts across investment trusts have been a pretty constant feature over the past few years. However, they had slightly narrowed by the end of 2025 to 12.5% versus the end of 2024 when they stood at 15%. Over £10bn of share buybacks occurred in 2025 which was a record year. The investor need for more liquid trusts has meant a number of mergers over recent years, 2024 being a record year which was quickly broken by 2025. The largest merger in recent history was the Alliance and Witan merger in 2024.
I recently met with a UK mid cap investment trust, and the managers highlighted that since the year 2000 the UK 250 ex-investment trusts has gone up around 800%, just outperforming the S&P 500 by around 40-50%. It has also significantly outperformed the UK 100 by around 400%. I thought this was interesting but as I mentioned above in that time investment trusts were only around 12-13% of the 250 constituents.
I looked at the most recent factsheets, so as at end of Q1 2026. Over one, three, & five years the 250 ex-investment trusts has underperformed its regular 250 counterpart and has been more volatile. 1 year performance was 12.5% for ex-investment trust vs 12.9% for regular, and the 5 year number was 14.4.% vs 14.9%. The 5-year volatility number was 16.9 for the 250 ex investment trusts vs 14.9 for the regular 250. Only by small numbers but the point is still valid.
There have been a lot of changes to the investment trust sector since it was created, with investors looking for liquidity, performance and the justification for using the vehicle. There are also many more diversified trusts out there which contribute positively to performance but also contribute in different market conditions. According to The Investing Collective’s report about the use of investment companies by UK wholesale investors, over 50% of respondents found liquidity as a limiting factor and one third said cost disclosure was a reason not to buy.
We have long used investment trusts in Hawksmoor and think there are some attractive opportunities to buy these at discounts. 74% of respondents from The Investing Collective’s report said discounts were a main attraction. Alternative trusts have fared worse than other asset types during the current conflict in the Middle East: I saw a REIT recently which had an average 9% discount over the last 12-18 months but had gone to 25% in March. Some equity trusts have weathered the volatility a little better. The largest investment trust Scottish Mortgage started trading at a premium to its NAV in April for the first time since 2021, but F&C is on a nearly 8% discount to NAV.
Emily Cave – Research Analyst
FPC26692
All charts and data sourced from FactSet
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