Something curious is happening with one of Britain’s oldest investment vehicles. Ownership of investment trusts among everyday UK investors has slipped to its lowest point since tracking began a few years ago, dropping from twelve percent to just nine percent in a single year. That might sound modest on paper, yet the numbers paint a clearer picture of quiet abandonment. At the same time, exchange-traded funds have nearly quadrupled in popularity, climbing from five percent to almost twenty percent over six years. I’ve watched this shift unfold and can’t help wondering whether we are watching a genuine change in preference or simply a failure of communication.
Why Investment Trust Ownership Keeps Falling
The latest research draws on several large surveys, one of them covering six thousand nationally representative adults. The data shows a particularly sharp drop among people aged thirty-five to fifty-four. Adoption in that group fell from twelve percent to seven percent across six years. That demographic often holds the bulk of investable assets, so the decline carries real weight. A lower percentage of holders does not automatically equal fewer trusts in absolute terms, given that more people invest overall these days. Still, platforms report a smaller share of assets sitting inside investment trusts, which suggests the retreat is happening in real money as well as percentages.
Part of the explanation feels almost too straightforward. Investors simply find other products easier to grasp. ETFs have become shorthand for cheap and straightforward. Trusts, by contrast, still carry a reputation for complexity and a slightly old-fashioned air. One industry voice put it plainly: trusts keep trying to win people over with sixty-page documents and dense explanations, yet most investors want the key points delivered quickly and without fuss. Beyond the genuine enthusiasts, the majority prefer to spend as little time as possible on the details.
Look at the holding periods and the gap becomes even clearer. Nearly half of current trust owners have held their positions for ten years or longer. Only eighteen percent of ETF holders can say the same. Meanwhile, eight times as many people bought an ETF for the first time last year compared with those who bought a trust. The flow of new money is heading elsewhere, and that trend shows little sign of slowing on its own.
The Communication Gap That Hurts Trusts
I’ve always believed the product itself is not the main problem. Investment trusts still offer features that open-ended funds and many ETFs cannot match. The ability to use gearing, the closed-ended structure that lets managers take a genuinely long view, and access to less liquid assets all remain valuable. The difficulty lies in getting those advantages across to a broader audience that now expects simplicity and competitive pricing as standard.
Recent industry commentary has highlighted how activist pressure forced boards to pay more attention to the retail vote. That episode served as a reminder that private investors matter. Yet the same research that flagged the ownership drop also described the situation as a genuine call to action. Boards need to speak more clearly to the next generation of customers and show where trusts still fit inside a modern portfolio.
Trusts are trying to compete with sixty-page PDFs and complex explainers and this misses a key point about getting through to retail investors. Beyond the hobbyists, most people want to spend as little time on this as possible.
That observation feels accurate. The language around trusts often remains dense. Terms such as discount to net asset value, gearing and continuation votes appear regularly, and while they describe real features, they can sound like barriers rather than benefits. ETFs, by contrast, usually arrive with a one-sentence pitch about low cost and daily liquidity. Simplicity wins attention, at least in the short run.
Where Younger Investors Fit Into the Picture
Not every age group is walking away. Ownership among under-thirty-fives has actually edged higher, rising from seven percent to nine percent since 2021. That small increase matters because it shows the product can still attract new blood when the message lands. Industry representatives have begun targeting the twenty-five to forty-four age band specifically, arguing that longer time horizons make trusts especially suitable. Younger investors can, in theory, ride out short-term volatility and benefit from the ability to hold less liquid or early-stage assets that other vehicles struggle to access.
One point often raised is the capacity for trusts to take positions in private companies or specialised areas that open-ended funds find harder to manage. Gearing can amplify returns when markets rise, although it also magnifies losses when they fall. For someone with decades ahead of them, those features can make sense. The challenge remains turning that theoretical advantage into a clear, memorable reason to choose a trust over the growing menu of simpler alternatives.
In my view the industry has been slow to adapt its tone. Many trusts still market themselves primarily to experienced private investors and wealth managers. That audience understands the nuances. The larger pool of newer investors does not, and they are the ones driving the rise of ETFs. Bridging that gap will require sharper messaging and, perhaps, more competitive fee structures in some cases.
How the Industry Is Starting to Respond
Awareness campaigns aimed at younger adults are already under way. The argument being made is straightforward: investment trusts can give retail investors access to areas of the market that remain difficult to reach through other fund types. They can also use borrowing to enhance returns over long periods. Whether those points cut through remains to be seen, but at least the conversation has moved beyond defending the status quo.
Boards face pressure from two directions. On one side sits the need to demonstrate value to existing shareholders, many of whom have held for a decade or more. On the other sits the requirement to attract fresh capital from people who currently see trusts as complicated or expensive. Balancing those demands is not simple. Some trusts have already narrowed discounts through share buy-backs or clearer communication of strategy. Others continue to trade at wide discounts, which can deter new buyers even when the underlying portfolio looks solid.
Perhaps the most interesting aspect is the contrast in investor behaviour. Long-term trust holders tend to stay put, treating the vehicle as a core holding. Newer ETF buyers move more freely, often treating the products as building blocks that can be swapped in and out. That difference in mindset may explain part of the ownership gap. Trusts reward patience; many modern investors prefer flexibility.
What the Numbers Actually Reveal
Let’s look at the figures without the spin. Ownership of investment trusts among UK adults has fallen to nine percent. Six years earlier the equivalent figure stood higher. ETF ownership has moved in the opposite direction with striking speed. The proportion of platform assets allocated to trusts has also declined. These are not abstract statistics. They reflect real choices made by thousands of people allocating their own money.
The age breakdown adds further colour. The thirty-five to fifty-four group, often at peak earning power, has reduced its exposure noticeably. The under-thirty-five cohort has edged higher, though from a low base. That pattern suggests the product still has potential with newer investors, yet struggles to hold the attention of those already established in the market. Whether the industry can reverse the broader trend depends on how effectively it can reframe the conversation.
- Investment trust ownership among UK investors has reached its lowest tracked level
- ETF ownership has nearly quadrupled over the same multi-year period
- Almost half of current trust holders have stayed invested for ten years or more
- First-time ETF purchases last year vastly outnumbered first-time trust purchases
- Younger investors show a modest increase in adoption while the middle-aged group has declined
Those bullet points capture the core movement. The deeper question is whether the decline reflects a permanent preference shift or a temporary period of adjustment. Markets go through phases. Products that once dominated can lose ground and later regain it when conditions change or when the industry adapts. Investment trusts have survived previous cycles of scepticism. Their closed-ended structure has proved useful in certain market environments. The current challenge is different because the competition is no longer just other active managers. It is a whole category of vehicles designed for simplicity.
The Practical Advantages That Still Matter
Despite the ownership slide, the structural features of trusts remain distinctive. Because they are closed-ended, managers do not face daily inflows and outflows that force them to sell holdings at inconvenient times. That stability can support a more patient investment approach. Gearing, when used carefully, can improve returns over full market cycles. Access to private equity, infrastructure or specialised equity strategies is often easier inside a trust than inside an open-ended fund constrained by daily liquidity requirements.
These points are not theoretical. They have delivered results for investors who stayed the course. The difficulty is that many of the advantages only become obvious over multi-year periods. In an environment where investors can check portfolio performance daily on an app, the long-term nature of the product can feel less compelling. I’ve found that the best trust investors tend to set the position and then largely ignore the short-term noise. That mindset is becoming rarer.
Cost also plays a role. Some trusts still carry higher ongoing charges than the cheapest passive ETFs. While active management and specialised strategies justify higher fees in certain cases, the gap has become harder to ignore for cost-conscious investors. The industry has made progress on fees in recent years, yet the perception of expense lingers. Perception, once established, takes time to shift.
What Boards and Managers Need to Change
Clearer, shorter communication would help. Instead of lengthy annual reports aimed primarily at professional readers, trusts could produce concise summaries that highlight the three or four reasons an ordinary investor might care. Performance relative to a relevant benchmark, the current discount or premium, the level of gearing and a plain-English description of strategy would cover most of what a new buyer needs. Anything beyond that can sit in the longer documents for those who want detail.
Engagement with retail platforms also matters. Many newer investors discover products through the search and filter tools on the platforms they already use. If trusts appear less frequently or rank lower in those tools because of complexity or cost filters, they lose visibility. Improving the way trusts present themselves inside those digital environments could make a measurable difference.
There is also room for more creativity in product design. Some trusts have already moved toward more focused strategies or lower fee structures. Others have introduced mechanisms that address the discount problem more aggressively. Continued experimentation will be necessary if the sector wants to compete for the next wave of capital.
One subtle point often overlooked is the role of financial advisers and wealth managers. Many of them still use trusts extensively. Their clients form a stable base of capital. Yet the direct-to-consumer market has grown rapidly, and that segment currently favours simpler products. Reaching those investors without intermediaries requires different skills and different language.
Looking Ahead With Realistic Expectations
I do not expect investment trusts to disappear. The structure still solves problems that other vehicles cannot. What seems more likely is a period of further polarisation. The best-managed, best-communicated trusts will continue to attract capital and trade closer to asset value. Those that fail to adapt may see discounts widen and ownership continue to drift lower. The industry as a whole will need to accept that the old assumption of patient, knowledgeable private investors is no longer the default.
Younger investors who do find their way into trusts may become the long-term holders of the future. Their slightly higher adoption rate already hints at that possibility. If the current awareness efforts succeed in converting curiosity into actual holdings, the ownership numbers could stabilise or even reverse. Success will depend on whether the message remains consistent and whether the products themselves continue to deliver distinctive results.
The rise of ETFs is not a temporary fashion. It reflects a genuine preference for transparency, low cost and ease of use. Trusts do not need to become ETFs. They do need to explain their remaining advantages in language that feels equally clear and modern. Until that happens, the ownership gap is likely to persist.
Markets reward adaptability. Investment trusts have adapted many times across their long history. The current test is whether they can adapt their communication and their client engagement with the same energy they once applied to portfolio construction. The data already shows what happens when that effort falls short. The next few years will reveal whether the industry can close the gap or whether the decline becomes the new normal.
For individual investors the practical takeaway remains straightforward. Investment trusts still offer features worth understanding. They are not automatically superior or inferior to other vehicles. They simply operate under different rules. Anyone building a portfolio should weigh those rules against their own time horizon, risk tolerance and preference for simplicity. The recent ownership numbers suggest many people have already made that calculation and chosen the path of least resistance. Whether that choice proves optimal over the long run is a question only time and markets can answer.
In the meantime the conversation around trusts has become more urgent. Boards, managers and industry bodies all recognise the need for clearer outreach. The research that highlighted the ownership drop also served as a useful mirror. Looking into that mirror and deciding what to change is the hard part. The numbers will keep moving regardless. The only open question is the direction they take next.
