In the first half of 2025, buybacks of investment trust shares came close to £5 billion

A "whirlwind" of corporate activity has characterized the first half of 2025, with discounts decreasing as boards return capital to shareholders

According to the Association of Investment Companies (AIC), investment trust share buybacks increased by nearly a third in the first half of 2025 when compared to the same period the previous year.

In the first half of 2025, share buybacks (excluding tender offers and redemptions) totaled 4.7 billion, which was 32% more than the corresponding amount from 2024 (3.62 billion).

In order to maximize value, "Boards have been engaging with shareholders and considering all options," stated AIC CEO Richard Stone. In the last six months, there have been 19 fee adjustments made to benefit shareholders.

In addition, there was a "whirlwind" of corporate activity for investment trusts in the first half of the year, with two mergers, four acquisitions, and eleven liquidations, as opposed to nine in all three categories during the same time last year.

During the past three years, both share buybacks and growing investment trust discounts have occurred simultaneously. One of the most widely used fund wrappers for long-term, capital-intensive investments, such as venture capital or renewable energy infrastructure, is an investment trust because of its closed-ended structure. These investments are typically very sensitive to changes in interest rates.

Interest rates increased in 2022, which caused the gap between an investment trust's outstanding shares and its net asset value (or "NAV") to widen. Since then, it has stayed in the double digits.

According to Annabel Brodie-Smith, director of communications at AIC, "this resulted in record share buybacks which have been increasing every year since 2022." "This year, discounts have begun to decrease, and there are several reasons for this, including improving markets and declining interest rates, but buybacks, mergers, and proactive board actions have also played a role.

Discounts on investment trusts are decreasing.

Discounts on investment trusts also decreased in the first half of 2025. Over the past six months, the average discount has decreased by 1 point and 5 percentage points, even though the average investment trust still trades at a double digit discount.

"A modest step, but a welcome one," AIC research director Nick Britton said.

Only seven of the investment trust sectors that the AIC monitors have seen a widening of discounts, while 29 saw a narrowing.

According to Britton, "corporate activity has been a big driver of this." Discounts have shrunk the most in the Property UK Commercial sector, where they went from 24 percent to 15 percent. The percentage of trusts devoted to residential real estate has also significantly decreased, falling from 21% to 12%.

Some of these sectors' trusts have announced strategic reviews (like Life Science REIT) or been the subject of takeover bids (like Warehouse REIT).

Investment trusts frequently trade at a discount due to the intricacies involved in valuing their assets and the hidden expenses of closing a trust and giving all of the capital back to shareholders, but consistent double-digit discounts, such as the one the industry is currently facing, are comparatively uncommon.

A buying opportunity may be presented by steep discounts for investors seeking a relatively inexpensive entry point into a specific industry or asset class.

According to Britton, "we've been saying for a while that deep discounts can't last forever; some combination of improving sentiment and M&A will narrow them eventually." Even though we're far along in this process, there is still room for improvement and possibly more money to be made by bargain hunters because the average industry discount is still in the double digits.

Investment trust business operations.

Mergers.

The Invesco Asia Trust and Aberdeens Asia Dragon Trust merged in February to form the Invesco Asia Dragon Trust (LON:IAD), one of the two investment trust mergers that occurred in H1 2025.

The merger of Henderson International Income and JPMorgan Global Growth & Income came next in May. The name JPMorgan Global Growth & Income (LON:JGGI) was kept by the continuing trust.

Alterations to management and acquisitions.

In May, Care REIT was purchased for £840 million by CareTrust REIT, a US-based trust that was joining the UK market.

Subsequently, in June, BBGI Global Infrastructure was acquired by Boswell Holdings, PP Bidco (Foresight) acquired Harmony Energy Income, and LondonMetric Property acquired Urban Logistics REIT.

Invesco Perpetual UK Smaller Companies changed from Invesco to Artemis in March to become Artemis UK Future Leaders (LON:AFL), and Triple Point Social Housing REIT changed from Triple Point Investment Management to Atrato Partners in January to become Social Housing REIT (LON:SOHO).

Liquidations. .

The liquidation of eleven trusts during the first half of the year resulted in additional consolidation in the investment trust market.

In the first quarter, ten of these occurred. In an unsuccessful attempt to replace the boards of the Saba seven investment trusts, activist investor Saba Capital and New York hedge fund Henderson Opportunities and Keystone Positive Change were two of the liquidated trusts.

According to Brodie-Smith, "Saba has undoubtedly had an impact this year, but over the past two years, the industry has been proactive in terms of buybacks, mergers, and other activity."

She went on to say, "This year, several Saba-targeted trusts have run tender offers, which are essentially massive buybacks."