Key Takeaways
- 15 investment trusts were liquidated in 2025, more than double the number in 2024.
- Trust boards have been more proactive, not least because of increased pressure by activist investors.
- Corporate activity is beginning to address persistent issues around scale, liquidity, and discounts, experts say.
A rising number of UK investment trusts are being wound up, leaving investors to decide whether to receive their money back or see this cash “rolled over” into a new fund. This trend is part of a wider wave of change in the sector, which has seen a flurry of mergers, acquisitions, strategic reviews, and record levels of share buybacks.
In 2025, 15 investment companies were liquidated, compared with seven in 2024 and eight in 2023, according to data from the Association of Investment Companies. So far this year, Smithson Investment Trust, a mid-cap focused fund launched by Fundsmith in 2018, has been wound up, while SDCL Energy Efficiency SEIT, a renewables trust, will put a wind-down proposal to investors to a vote on July 10.
What Happens When a Trust Is Liquidated?
The decision to liquidate or wind up a trust can be made because of poor performance, activist intervention, or decisions made by asset managers to simplify their product offering.
Usually the decision is put to a shareholder vote, with investors often offered a range of options, including a cash exit or “default rollover” into a new investment trust. A decision to liquidate then triggers a sale of assets, with investors usually receiving their money back in stages at a discount to the net asset value or NAV. If the trust is merged with another run by the same company, that can often trigger a change in fees, fund managers, and portfolio holdings.
A recent example is BlackRock Throgmorton Trust, whose assets were liquidated and combined with the £655 million BlackRock Smaller Companies Trust BRSC. Most investors opted to have their shares rolled over into the alternative BlackRock trust, but some chose to receive their money back. Those who opted for cash received shares at a 1% discount to NAV.
Recent Liquidated UK Investment Trusts
Among the trusts that have disappeared are vehicles investing in UK smaller companies, renewable energy, environmental strategies, and specialist debt.
- Downing Strategic Micro-Cap
- BlackRock Throgmorton Trust
- abrdn Diversified Income and Growth
- Starwood European Real Estate Finance
- Diverse Income Trust
- Smithson Investment Trust
- Triple Point Energy Transition
- Menhaden Resource Efficiency
- Doric Nimrod Air Three
- Jupiter Green
- Keystone Positive Change
- Premier Miton Global Renewables
- NB Distressed Debt
- Weiss Korea Opportunity
While each trust has its own story, the underlying themes are consistent. Annabel Brodie-Smith, communications director at the AIC, says the recent wave of corporate activity reflects an industry reshaping itself, rather than one in decline. “It’s been a challenging period for investment trusts, but things are looking up,” she says. “Discounts have narrowed, and performance is strong.”
According to the AIC, the average investment trust returned 23% over one year, 31% over five years, and 178% over 10 years. Over one year, the FTSE AllShare has risen by 17% and the FTSE 100 by just under 20%.
Brodie-Smith says boards have become increasingly proactive in looking to deliver value for shareholders through mergers, acquisitions, liquidations, fee reductions, and other corporate actions, resulting in fewer trusts with a larger average size. However, she says this hasn’t reduced investor choice, with more than 290 investment trusts still listed in London across specialist sectors ranging from UK micro-cap stocks to aircraft leasing.
Investment Trust Discounts Remain the Catalyst
Ben Conway, CIO and head of fund management at Hawksmoor Investment Management, says that persistent discounts remain the primary driver behind many of the liquidations.
Most UK-listed investment trusts’ share prices trade at a discount to the net asset value per share, reflecting weaker investor sentiment, and meaning the value of the trust assets is more than its current market price. Investors closely watch discounts and premiums to monitor whether trusts are in or out of favor. Investment trust market prices follow the same dynamic as stock prices: high demand sends the price higher, and vice versa.
“There is simply not enough demand today to close those discounts. Shareholders believe they’ll receive better returns by liquidating portfolios and receiving close to net asset value than continuing to wait for discounts to narrow,” Conway explains.
Discounts have been particularly acute among smaller investment companies and those investing in less-liquid assets, such as renewable infrastructure, specialist debt, and UK smaller companies.
Conway argues that liquidations represent a natural market response to weak demand: “Fewer trusts means fewer shares in the market, which increases the probability that discounts narrow for those that remain.”
Morningstar fund analyst Daniel Haydon agrees that the trend was predictable: “I expected there to be more mergers and perhaps some liquidations. Scale has become increasingly important, and boards have become much more willing to pursue mergers or windups where they believe they are acting in shareholders’ best interests.”
Haydon notes that consolidation has spread across almost every corner of the investment trust universe. Japanese equity trusts have seen multiple mergers, asset manager Aberdeen has rationalized several investment companies, listed property vehicles have combined into larger REITs, and the merger between Alliance Trust and Witan in late 2024 created one of the sector’s largest investment companies.
Investment Trust Activists on the March
The recent wave of liquidations appears to be addressing one of the investment trust sector’s biggest structural problems. Discounts have already started to narrow, helped by liquidations, mergers, aggressive share buybacks, and greater board action. Activist investors such as Saba Capital have also increased pressure on boards to tackle persistent discounts and underperformance. For example, in June, the board of Impax Environmental Markets IEM was replaced by Saba appointees.
“I always describe activists as wasps at the picnic,” says Conway. “Nobody wants them there, but they’re a necessary part of the ecosystem.”
Meanwhile, Haydon says the average investment trust discount has narrowed to single digits for the first time since 2022, although it remains elevated by longer-term standards.
Although they both note the positives of the liquidations in terms of addressing the discount problem, the key question is where investors reinvest once trusts disappear. Often, as with European Opportunities Trust EOT, investors are offered the option of a “default” rollover into another trust as an alternative to receiving cash. In this case, shareholders can switch their money into JP Morgan European Growth and Income JEGI.
Conway says the benefits only materialize if investors recycle capital back into other investment trusts: “The only issue with that logic is it assumes the money stays within the sector.” And that is far from guaranteed, particularly as wealth managers have consolidated, with many introducing stricter liquidity requirements, making smaller investment trusts increasingly difficult to own.
If capital released through liquidations instead flows into larger open-end funds—particularly in sectors such as UK smaller companies—the investment trust universe could continue shrinking despite improving discounts. “I don’t have evidence that’s happening,” Conway adds, “but it is certainly one of the risks.”
Why Investment Trusts Still Matter
Many of the trusts disappearing invest in precisely the types of assets that closed-ended structures were designed to own. Investment trusts remain one of the most effective ways of accessing illiquid assets, such as infrastructure, renewable energy, specialist lending, and private markets, since managers are not forced to sell holdings to meet daily redemptions.
Haydon argues that this structural advantage remains unchanged: “When investment trusts are investing in private or illiquid securities, the structure makes more sense.”
The AIC’s Brodie-Smith agrees: “Investment trusts have many advantages, including strong long-term performance, and they provide a fixed pool of assets, which enables their fund managers to take a long-term view of their portfolio. This makes them particularly suitable for hard-to-sell assets, like smaller companies, private companies, and infrastructure. They are easily bought and sold on the stock market and have important income advantages that allow trusts to build up long records of dividend increases. They also have independent boards of directors to look after shareholders’ interests, and investors can have a say on the future of their investment trust by voting and attending AGMs [annual general meetings].”
UK Pension Reforms Could Spur Trust Demand
Despite the challenges, several industry participants suggest the backdrop is beginning to improve. Andrew Summers, investment industry consultant and advisor, thinks the recent wave of consolidation is creating a healthier investment trust market. “Investment trusts are better positioned than they have been for some time. Long-overdue consolidation and corporate activity are beginning to address persistent issues around scale, liquidity, and discounts,” he says. “A fragmented sector is gradually becoming more investable, driven by the consolidation of large investors, who themselves need larger, cheaper, better governed, more relevant vehicles.”
Another potential catalyst comes from pension reform. Following amendments to the Pension Schemes Bill, investment trusts holding private assets will now come under the scope of the Mansion House Accord, a UK government initiative to increase allocations to productive finance. Many in the industry think this could become an important new source of demand for listed investment companies investing in infrastructure, renewable energy, and other private assets. Increasing demand is also a way for investment trusts to narrow discounts.
Conway says this could prove particularly significant because pension plans can gain access to private assets more efficiently through investment trusts than through long-term asset funds, which typically need to retain part of investors’ money in cash to manage liquidity. In contrast, investment trusts are generally “fully invested,” so all shareholder money is allocated to equity markets. He adds that discounts could even provide investors with an incentive to buy a trust whose underlying assets are trading for less than their net asset value.
