The UK investment trust sector is entering 2026 with a mix of pressure and promise, according to the Association of Investment Companies, as shareholder activism, record buybacks and persistently wide discounts converge.
The immediate focus is governance. Shareholders in Edinburgh Worldwide Investment Trust are being urged to vote ahead of a requisitioned general meeting called by Saba Capital, which is seeking to replace the entire board with three new directors.
While Saba’s high-profile campaigns were defeated across seven trusts last year, the AIC is warning against complacency. With platform voting deadlines looming, the outcome may hinge less on sentiment and more on participation.
The backdrop to this vote is a sector still wrestling with discounts. Despite a rally in UK equities that saw the FTSE 100 break through 10,000 late last year, investment trust shares continue to trade at an average double-digit discount to net asset value. That disconnect has persisted for 43 months, a stretch that is long by historical standards but not without precedent.
What has changed is the response from boards. In 2025, investment trust buybacks exceeded £10 billion for the first time, a record that reflects a growing willingness to return capital rather than deploy it into new investments when shares trade at a material discount.
Buybacks have risen each year since 2023 and helped narrow the average discount from 15.0% at the start of last year to 12.5% by year-end.
The AIC’s longer-term data offers some perspective. The longest period of double-digit discounts ran from December 1972 to June 1989, a 16-and-a-half-year stretch shaped by weak equity markets and unfavourable tax treatment.
A shorter but still painful episode occurred between June 1997 and January 2001, spanning the dotcom boom and bust. That period also lasted 43 months, exactly matching the current run that began in May 2022.
There are signs, however, that today’s cycle is evolving. Alongside buybacks, corporate activity has picked up sharply. During 2025, 27 mergers, acquisitions and liquidations were completed as boards sought to address structural imbalances between supply and demand. The implication is that boards are no longer relying on markets alone to correct discounts.
For investors, the message is nuanced. On one hand, activism is becoming a more persistent feature of the landscape, raising the stakes around voting and engagement. On the other, sustained buybacks and consolidation are starting to have an effect, even if progress is gradual.
The AIC suggests that this period may ultimately be viewed in the same way as past episodes of deep discounts: uncomfortable at the time, but rewarding for patient capital.
As with January sales, the opportunity does not last indefinitely. Whether that proves true will depend on continued board action, shareholder engagement and a market environment willing to reward structural change rather than just wait for sentiment to turn.