More than 150 years ago, investment trusts were born to solve a radical problem: ordinary savers had no access to diversified, professionally managed portfolios, particularly those holding overseas companies.
The Foreign & Colonial Investment Trust (F&C), launched in 1868, changed that by pooling capital and offering access to “the investor of modest means”. It was a democratic innovation and arguably one of the most consequential in the history of British retail investing.
Today, investment trusts are coming full circle: once again they must prove their relevance to a broad retail audience in a rapidly changing market.
UK capital markets are being re-engineered at speed. Regulatory reforms, faster IPO processes and a push to stimulate domestic investment have placed retail investors back at the centre of policy. Westminster wants more listings in London, more growth capital for British companies and a public that feels invested, literally, in national economic success.
For newly listed companies, these are powerful tailwinds. For investment trusts, some older than the lightbulb, the test is not just adaptation and transparency, but also survival. They need to articulate their value in an era shaped by digital platforms, transparent pricing and a growing cohort of investors who expect to be educated, informed and, well, entertained.
The rise of activist investors has only sharpened the pressure. Saba Capital, a US hedge fund, has taken an industry that was coasting on habit and heritage and shaken it by the shoulders.
The thing is, the closed-ended structure of investment trusts can work out very well for retail investors. Unlike open-ended funds, trusts do not face redemptions that force managers to sell at the worst moments. They can access illiquid assets such as private companies, infrastructure and renewables, and smooth dividends using revenue reserves. These are meaningful advantages, but they must be communicated deliberately.
Exchange traded funds (ETFs), and their active counterparts, have raised expectations for low fees, transparency and liquidity. Trusts cannot win by mimicking them. They must clarify what closed-ended vehicles uniquely deliver: patience, permanence and access to assets the public would otherwise never reach.
Boards are beginning to respond. Mandates are being reviewed, dividend policies clarified, fees modernised and discounts tackled with buybacks, continuation votes and consolidations. The most visible change, however, is in communication. Historically the industry’s Achilles heel, it is now being rebuilt for a retail audience. Livestreamed AGMs, roadshows, podcasts and digital explainers are replacing dense reports and jargon-heavy brochures.
With average discounts still wide and activists circling, retail engagement is no longer optional — it is existential.
And retail shareholders are no longer passive or peripheral. Private investors today hold more investment trust shares than any other group, and in mainstream sectors such as UK Equity Income, Global and Global Smaller Companies, they dominate ownership.
Investors want clarity, but they also want personality: real people, real ideas and real stories. Some trusts have recognised this. TV campaigns, retail webinars and TikTok explainers would once have been heretical in this genteel corner of finance. Today, a growing number of players are embracing these channels. More need to come to the party. If their potential shareholder is scrolling, rather than strolling past a broker’s window, they need to be where their customers are and speak their language.
Alliance Witan demonstrates the new playbook. The trust invested in refreshing and amplifying its 137-year brand to broaden its appeal. Following the merger with Witan, the trust now has greater scale and a higher profile as a FTSE 100 member. It rebuilt its communications around digital channels and uses more explicit language around outcomes that matter to retail investors, rather than technical features of the investment proposition. While still focused on its core customers — older private investors who are big fans of the investment company structure — it is now also using influencers and social media to appeal to investors who may have not considered investment trusts before.
“The days when investment trusts could simply rely on stock exchange announcements to a narrow group of professionals to get them noticed are long gone,” says Mark Atkinson, senior director at WTW, investment manager of Alliance Witan. “In a much more competitive environment with a proliferation of communication channels, trusts must tailor their communications to their audiences.”
Even F&C, the original trust, has embraced the shift. One imagines the Victorian founders from 1868 blinking hard at it partnering with financial creators like Devamsha Gunput (@FinancialHotGirl) to share relatable, accessible content across their platforms. As Ross Duncton, head of Emea marketing & direct to consumer, at Columbia Threadneedle, the parent company of the F&C trust, notes, the mission remains the same: access, education, stewardship, though these digital collaborations may have left the founders clutching their pocket watches.
In order to engage a wider range of investors, Baillie Gifford has developed webinars, podcasts, YouTube channels and events, as well as publishing Trust Magazine. Scottish Mortgage, the firm’s flagship trust and a favourite among retail investors, hosted a digital conference that featured astronaut Chris Hadfield, making the event a little more starry than your traditional investor day.
Ian Bruce, Baillie Gifford’s head of marketing, tells me they ran their first paid-for campaign on TikTok this year to try to reach a younger audience. Those that have dabbled in the world of TikTok and Instagram say the results have been good in terms of digital traffic, but it’s hard to know whether the attention converts into purchases of shares because they don’t control the point of sale. As Atkinson explains: “Even if you track the process to the end, the conversion is unlikely to be immediate since buying investments is often a long and disjointed journey. Still, it helps to raise brand profile.”
Whether they succeed in persuading new types of investor that the complexities and quirks of investment trusts are selling points is not yet clear. But investors who understand a strategy are more likely to stay with it. That stickiness is the most undervalued asset a closed-ended vehicle possesses.
Investment trusts were built to democratise investing. Their challenge now is to recommit to that mission in a modern marketplace defined by choice, complexities and noise. If they succeed, they will not be relics of Victorian finance but engines of Britain’s next era of capital growth. This is their full circle moment.
Maike Currie is vice-president of PensionBee, a pension consolidation firm. She has a holding in Scottish Mortgage