The Shake-Up in Britain’s Investment Trust Scene
Investment trusts have long been viewed as the steady, somewhat sleepy option for long-term investors in the UK. They offer diversified exposure, often with a focus on growth or income, and have historically been a favorite among retail savers. But lately, the sector feels anything but sleepy. Persistent discounts—where share prices lag behind net asset values—have lingered in double digits for years, frustrating shareholders and drawing sharp attention from those who see opportunity in the gap.
In my view, this isn’t just a temporary blip. It’s a structural issue that’s been building, amplified by changing investor preferences and market conditions. And now, one high-profile player is forcing the conversation into the open.
Who Is the Activist Turning Heads?
The name that’s dominating discussions is an American hedge fund manager known for bold moves in credit markets and beyond. His firm has built significant stakes in several trusts, sometimes owning 20-30% or more, giving real leverage to demand change. The goal? Narrow those stubborn discounts through board overhauls, better capital management, or even liquidity events that let investors cash out closer to true value.
What makes this campaign stand out is the persistence. After an initial round of challenges that didn’t fully succeed in ousting boards, the pressure hasn’t eased. Instead, stakes have grown in key targets, and new tactics—like questioning specific portfolio decisions—are keeping the heat on. It’s a reminder that activism doesn’t always win on the first try, but it can still shift behavior over time.
I’ve never had this happen before. I didn’t realise just how clubby the U.K. financial world is.
— A prominent activist reflecting on earlier setbacks
That sense of a “clubby” environment is something many in the City have felt for years. Decisions sometimes seem to prioritize continuity over shareholder value. But when discounts hit extremes, patience wears thin, and outsiders feel emboldened to step in.
Key Targets and the Tactics at Play
One trust in particular has become ground zero for the latest round. This tech-focused vehicle, heavy on innovative private holdings like space exploration companies, saw its board challenged not once but twice. The activist built a stake north of 30%, enough to block certain moves and push hard for transparency on asset sales.
Why the fuss over one position? A partial sell-down of a high-flying asset right before a potential valuation jump left millions on the table, or so the argument goes. The board counters that it was about risk management—avoiding over-concentration in illiquid privates. Both sides have merit, but the optics? Not great. It highlights how even strong performers can face scrutiny when discounts persist.
- Building large stakes to gain influence
- Requisitioning shareholder meetings for board changes
- Highlighting specific decisions that appear value-destructive
- Pushing for mechanisms like buybacks or tenders to close gaps
These aren’t new tactics, but the scale and frequency feel fresh in the UK context. Other trusts have responded proactively—some announcing tender offers allowing sales near NAV, others stepping up share repurchases. It’s clear the pressure is prompting action that might not have happened otherwise.
Why Discounts Have Stuck Around So Long
Discounts aren’t a new phenomenon, but their stubbornness is unusual. The average across the sector hovers around 15%, a level not seen for such an extended run in decades. Several factors play into this: higher interest rates diverted capital to safer assets, institutional selling offset retail buying, and some boards have been slow to respond.
Perhaps the most frustrating part is that many trusts deliver solid underlying returns. NAV growth can be strong, yet the share price doesn’t follow. That disconnect erodes confidence and invites challengers who argue for structural fixes.
| Factor | Impact on Discounts |
| Higher Rates | Diverts capital to bonds/fixed income |
| Institutional Flows | Selling pressure outweighs retail buying |
| Board Inaction | Lack of aggressive discount control |
| Market Sentiment | UK equities overlooked vs global peers |
Record buybacks show boards are listening, at least somewhat.
Broader Implications for Investors
For everyday investors, this isn’t just gossip—it’s relevant. Successful pushes could unlock value for those holding at discounts. But there’s risk: forced changes might disrupt good teams or shift strategies unsuitably. Not every campaign succeeds—boards can rally support, especially with strong retail turnout.
In my experience, the best outcomes come from constructive engagement. Activists bring urgency; incumbents bring knowledge. Clashes without resolution hurt everyone a bit.
What’s Next in This Saga?
With votes on key proposals, turnout will decide much. Advisory firms often favor continuity, but retail sentiment could swing it. Beyond individuals, the sector evolves—more discount controls, buybacks, mergers. The spotlight accelerates that, making the market more responsive.
One thing’s clear: complacency is fading. Investors have more tools demanding alignment. Whether this campaign succeeds fully or not, it’s changed the conversation—and that might be the biggest win for the sector’s future.
