Investment trust boards have worked hard to adapt to a new investment environment. Their efforts may be paying off.
- Investment trusts have undertaken significant M&A and buyback activity over the past 12 months
- The wealth manager market has changed, while activists are also putting pressure on the sector
- New research shows retail investors are becoming increasingly important for the sector
Investment trusts have undertaken a flurry of corporate activity over the past 12 months, with high profile mergers and significant buyback activity. A new report suggests this has been successful in reshaping the landscape of the sector, drawing in new retail investors as a counterbalance to the activists that have targeted major trusts
Investment trust boards have long recognised that the sector needed to change its shareholder base. The wealth manager market on which it had relied was changing, with significant consolidation. These larger groups found it difficult to buy investment trusts, which often lack the scale to accommodate them. Further change has been forced on the sector by the intervention of activists, notably Saba Capital, who has been making its presence felt with boards across the sector.
A recent study by Warhorse Partners shows how the sector is reshaping. Retail investors increased the number of investment trust shares they hold by 4.6% in 2025 (11.5% by value). They now own 37% of investment trusts, with the number of shares they hold growing by 34% since 2020.
This has largely come at the expense of wealth managers, who reduced the number of shares they hold by 9%, even though the value they hold increased by 4.4%. There has been hope that small, independent brokers, increasingly launched as a counterbalance to the larger wealth managers, could pick up some of the slack. The report showed they are increasing their holdings (by 8% to £8,1bn), but still only represent around 6% of the market.
In spite of the noise created by Saba, it remains only 1.6% of the institutional ownership of the market. Nevertheless, activists have increased their shareholdings by 9% and the group continues to have an outsized impact on the market.
The research points to a sector that is adapting. The M&A drive has been a combination of groups trying to create larger trusts to enable wealth managers to buy, and to give them greater brand recognition and marketing fire power among retail investors. It is also a response to activists, with trusts aiming to defend themselves against criticism, or give themselves more muscle in the fight.
The sector is reshaping its shareholder base to adapt to a new reality. It is a tribute to the long-term resilience of the investment trust sector and perhaps shows why it has survived so long, despite flirting with disaster from time to time
