Until the outbreak of the Iran war in March 2026, the investment trust sector was making meaningful headway, while still wrestling with some deep seated challenges that refuse to go away. In the face of volatile markets and an unpredictable US President, boards and managers of trusts have been working exceptionally hard to demonstrate their resilience and capacity to adapt. 

Between January 2025 and the end of February 2026, around 85% of investment trusts delivered a positive total return, with 170 of them delivering more than 10% to shareholders and 110 more than 20%. The average discount narrowed slightly from 16% to 14% over the same time period, so these numbers mainly reflect a year of what was above average equity market performance. They comfortably exceeded inflation running around 3%. 

At the time of writing the latest war in the Middle East has put a dent in these positive numbers, with equity markets falling and bond yields rising, an unhelpful combination for investors. Until the hostilities cease, it is too early to say for certain how the war and its consequences will play out.  

These uncertain conditions have left investors in the curious position of feeling both rewarded and uneasy at the same time. It is fair to say however that, as far as the things they can control are concerned, investment trusts - the ones that have survived the cull of the last three years - have quietly been justifying my optimism in this space a year ago. 

The structural shake out in the sector has certainly been dramatic. Over a couple of years, the number of listed trusts has fallen by roughly a fifth, with a steady drumbeat of liquidations, mergers and rollovers into open ended vehicles. This Darwinian process has removed some obvious weak links and, in many cases, allowed shareholders to exit at a modest premium to the prevailing share price, albeit usually still at a discount to net asset value. 

Yet new issuance has been negligible, and there has been no meaningful replenishment of the universe, so talking about a full blown renaissance for the sector still feels premature. Saba Capital’s continued aggressive campaign to unsettle boards and drive further change has undoubtedly had an effect, accelerating rationalisation, forcing boards to confront discounts and, indirectly, helping to secure overdue reforms to how platforms notify and enfranchise private investors.

The toolkit for tackling wider than desirable discounts – buybacks, tenders, continuation votes, manager changes, marketing and, if need be, an orderly wind up – is well known, and most trusts have by now tried at least one of them, but the past three years have underlined that there is no one size fits all solution. The medicine is working, but slowly. Beyond buybacks, tenders and continuation votes are gaining traction as more direct ways to align boards with shareholders and force periodic reality checks. 

On a positive note, fee structures are slowly evolving, with a growing minority of equity trusts tying management charges to market capitalisation rather than NAV, and more experimenting with enhanced dividend policies to meet demand from yield hungry private investors. All of these are positive developments for shareholders, and show the trust sector is evolving, as it has always done in the face of adversity. 

Looking ahead, the strength of gold, the uncertainty surrounding US trade and foreign policy, and the Iran war all testify to the risks that remain. Yet there are genuine grounds for optimism. Trusts are, in general, behaving more accountably to their owners: governance standards are improving, communication with retail investors is better, fees have come down, and boards are making fuller use of the tools at their disposal.

In addition, the longstanding issue of distorted regulatory cost disclosure appears to be on the way to a final resolution, which is a great mercy, and the sector as a whole is once again on average outperforming comparable open ended funds. Patient long term investors have always been the bedrock of support for investment trusts, and you can be sure that they will continue to be rewarded over time as the inherent advantages of the structure bear fruit.