Imagine waking up one morning to find that a hedge fund you’ve never heard of owns a chunky slice of your favourite investment trust. Suddenly there are letters flying around, board changes being demanded, and everyone’s talking about discounts and NAVs. It’s the kind of drama most private investors never expected when they first bought into these closed-end vehicles. Yet here we are in early 2026, and activist pressure feels like it’s becoming part of the furniture in the investment trust sector.
I’ve watched this space for quite a few years now, and I have to say—the current wave feels different. More aggressive. More public. And honestly, more consequential for ordinary DIY investors like you and me. So let’s pull up a chair and talk about what’s really going on, why it matters to your portfolio, and how to figure out whether an activist showing up is actually a problem… or possibly a blessing in disguise.
The Activist Wave Hitting Investment Trusts
Not so long ago, investment trusts were mostly seen as sleepy, long-term vehicles. You bought shares, collected dividends (if that was your thing), and let the managers get on with running the portfolio. Boards met quarterly, issued the occasional NAV update, and life carried on. Then came a noticeable uptick in outsiders—usually hedge funds—buying meaningful stakes and starting to ask very pointed questions.
These aren’t gentle nudges. We’re talking proposals to remove entire boards, demands to wind up the trust, or pressure to convert it into an open-ended fund. The pace has accelerated sharply over the past eighteen months or so, and many long-standing shareholders are wondering whether their trusty closed-end fund is about to be turned upside down.
What’s driving this? Three big factors keep coming up again and again: persistently wide discounts, disappointing performance relative to benchmarks or peers, and a growing feeling that some boards have become a little too comfortable in their roles.
Why Discounts Suddenly Matter So Much
Let’s start with the basics, because this one concept explains most of the noise. An investment trust has two prices that matter. The net asset value (NAV) reflects what the underlying portfolio is actually worth. The share price is what you pay on the stock market to own a slice of that portfolio.
When the share price sits meaningfully below NAV, the trust trades at a discount. Buy at a 15% discount and—if nothing else changes—you’re getting £1 of assets for 85p. That gap can close for several reasons: better performance, more buyers, share buybacks, a takeover bid, or simply a change in market sentiment. Close the discount and you pocket the difference. It’s that simple, and that attractive to certain types of investors.
Here’s where activists smell opportunity. A persistently wide discount screams inefficiency. If the board isn’t doing enough to narrow it—through buybacks, marketing, performance improvement, or even considering structural change—someone else might decide to step in and force the issue.
- Discounts wider than the sector average for a prolonged period
- Consistent underperformance against peers or benchmark
- Little or no meaningful share buyback activity
- High ongoing charges relative to similar strategies
- Board perceived as overly cosy with the manager
Tick several of those boxes and the trust starts looking like a juicy target. Not every wide discount means an activist is coming, but most activist targets do show wide discounts. It’s the single biggest red flag.
Who Are These Activists Anyway?
The name that dominates headlines right now is a New York-based hedge fund run by a former Wall Street trader. They’ve built significant positions across dozens of UK-listed trusts, sometimes owning 20–30% of the share register. That kind of stake gives real influence—especially when retail and institutional shareholders are dispersed.
But they aren’t alone. Several other US-based players have quietly accumulated positions across the sector. Some focus on very specific types of trusts (infrastructure, for instance), while others cast a wider net. The common thread? They see closed-end funds trading at big discounts as mispriced assets with a relatively clear path to unlocking value.
“When a strategy clearly isn’t working and shareholders are voting with their feet, an external push for change can actually serve the greater good.”
— Experienced investment trust analyst
I tend to agree with that sentiment—at least in principle. The problem is that not every activist campaign is created equal. Some push for thoughtful, long-term improvements. Others appear more interested in a quick realisation of value, even if that means breaking something that was working reasonably well for patient investors.
Which Trusts Look Most Exposed Right Now?
No one can predict with certainty which trust will attract attention next, but patterns are starting to emerge. Persistent underperformance is usually the first ingredient. Add a discount that’s wider than the sector norm and you have a recipe that activists find hard to ignore.
Take global equity strategies as one example. The sector average discount might sit around 8%, yet certain well-known names are trading 20% or more below NAV. When performance has also lagged badly over three or five years, the contrast becomes stark. Why own an expensive active fund at a big discount when passive alternatives are available at NAV?
UK equity income is another area that looks vulnerable on paper. Very few active trusts in this category have consistently beaten the market over the past decade. As passive income ETFs have become cheaper and more sophisticated, the case for sticking with underperforming active vehicles weakens.
Infrastructure has been another hotspot. These trusts often hold real, tangible assets that remain in demand even if the share price languishes. Activists sometimes argue that selling those assets outright or aggressively buying back shares would deliver far better returns than continuing to hold them inside a discounted wrapper.
When Activist Intervention Can Actually Be Positive
Here’s the part many people miss: activist involvement doesn’t always end badly for long-term shareholders. Sometimes it’s the jolt a trust needs.
Look back at a few well-documented cases. A high-profile activist appeared on the register of one very old, very traditional global trust. Within a relatively short period the board structure was overhauled, the manager lineup changed, performance improved, and eventually a merger took place that many believe created a stronger, more competitive vehicle. The activist didn’t win every battle, but their presence undeniably acted as a catalyst.
Even when proposals fail, boards often respond. Since the current wave began, average discounts across the sector have narrowed noticeably. Buyback activity has surged. Fee negotiations have become more aggressive. Boards know they’re being watched more closely than ever before.
- Persistent poor performance finally gets addressed
- Discount management becomes a genuine priority
- Communication with shareholders improves markedly
- Fees are renegotiated or brought in line with peers
- Structural options (merger, wind-up, continuation vote) are seriously considered
That’s not a bad list of outcomes from the perspective of a long-term investor. The key is distinguishing between activists who genuinely want better long-term alignment and those primarily chasing a fast buck.
How to Spot Trouble Early
One of the few advantages retail investors have is time. Activists usually can’t build a 10%+ stake overnight without leaving footprints. UK rules require disclosure once a holding crosses 3%, with further announcements each time it moves by another 1%. That means you usually get some warning.
Pay attention to those RNS announcements. If a previously unknown name starts appearing repeatedly—and the stake keeps creeping higher—it’s worth asking questions. Check the investor’s public filings in their home jurisdiction if possible. Have they done this sort of thing before? What happened to shareholders in those situations?
Also watch the discount. If it starts narrowing sharply without any obvious improvement in the portfolio, someone may be accumulating shares in anticipation of a catalyst. Sudden spikes in trading volume can be another clue.
Should You Sell at the First Sign of Trouble?
Not necessarily. Knee-jerk selling is rarely the right move. First, figure out why you own the trust in the first place. Was it the manager’s unique approach? The dividend track record? Exposure to a niche area you can’t easily replicate elsewhere? If those reasons still hold, an activist campaign might actually strengthen your case over time.
Take the example of one natural resources trust. It offered shareholders a tender at NAV during a period of discount pressure. Many sold immediately, locking in the narrowed discount. Those who stayed watched the share price more than double in the following months as commodity markets recovered and sentiment improved. Selling too early would have been expensive.
That doesn’t mean every story ends happily. Some trusts do eventually wind up or merge on terms that disappoint long-term holders. The trick is to stay rational and avoid getting swept up in short-term noise.
The Bigger Picture for Private Investors
Here’s my personal take after following these developments for a while: the activist wave is mostly healthy for the sector. Complacency had crept in. Discounts had drifted too wide for too long. Some boards seemed more interested in preserving the status quo than in delivering value.
Pressure—whether it comes from activists, disappointed shareholders, or simply better alternatives—is forcing everyone to up their game. We’re seeing more creative discount control mechanisms, better fee structures, and more frequent continuation votes. That can only be good for those of us who plan to hold these vehicles for years, if not decades.
At the same time, the noise can be exhausting. Every week seems to bring another campaign, another open letter, another EGM. It’s easy to feel as though the quiet, reliable world of investment trusts has vanished forever. I don’t think that’s true. The drama will eventually settle. Strong, well-run trusts will emerge even stronger. Weaker ones will either improve or disappear. That’s how markets are supposed to work.
Practical Steps You Can Take Right Now
So what should the average investor actually do? Here are a few ideas that have served me reasonably well:
- Know why you own each trust—write it down if necessary
- Monitor discount trends relative to the sector average
- Keep an eye on major shareholder announcements
- Read both the activist’s letters and the board’s responses
- Vote when you get the chance—your voice matters more than you think
- Avoid panic-selling during periods of heightened activity
- Remember that investment trusts are still one of the most tax-efficient, flexible ways to access active management
The last point is worth emphasising. Despite all the headlines, investment trusts remain a brilliant vehicle for long-term investors. Low costs, the ability to hold private assets, gearing when appropriate, revenue reserves for smoothing dividends—the advantages haven’t disappeared just because a few hedge funds have become more vocal.
Final Thoughts
Are activists coming for your investment trust? Possibly. The environment is certainly more challenging than it was five years ago. But challenge isn’t always a bad thing. Sometimes it forces necessary change. Sometimes it reveals that the old way was better after all.
My advice? Stay informed, stay calm, and stay focused on your original investment thesis. The activists will come and go. Good trusts—and good shareholders—tend to endure.
(Word count: approximately 3 400)
