Investment trusts purchased approximately £5 billion worth of their own shares during the first half of the year 2025
In the first half of 2025, the world of investment trusts has witnessed a flurry of activity, with a notable surge in share buybacks, mergers, and acquisitions. According to recent data, share buybacks from investment trusts increased by 32% in the initial half of 2025 compared to the same period in 2024, totalling £4.7 billion.
This rise in share buybacks can be attributed to several factors. Firstly, the increased corporate activity, including mergers and acquisitions, has helped narrow the gap between share prices and net asset values (NAVs), making buybacks more attractive. This trend was evident in several high-profile transactions, such as the acquisition of Urban Logistics REIT by LondonMetric Property in June, and Care REIT's acquisition by CareTrust REIT, a US-based trust entering the UK market, for $840.5 million in May.
Secondly, investment trust discounts have narrowed across many sectors. Significant narrowing occurred in the Property – UK Commercial and Residential property sectors. The sector where discounts have narrowed the most is Property – UK Commercial, with the discount closing from 24% to 15%. This narrowing has made buybacks more appealing, as it increases the potential return on investment for trusts.
Thirdly, some trusts may choose buybacks as a strategic move to reduce share count and increase earnings per share, potentially benefiting shareholders by improving the efficiency of their capital structure.
Lastly, improving market sentiment and the realization that deep discounts cannot persist indefinitely have encouraged trust boards to engage in buybacks to capitalize on valuation opportunities.
The corporate activity wasn't limited to buybacks. Invesco Asia Trust merged with Aberdeen's Asia Dragon Trust in February, forming the Invesco Asia Dragon Trust (LON:IAD). Similarly, BBGI Global Infrastructure was bought by Boswell Holdings in June, and Harmony Energy Income was acquired by PP Bidco (Foresight) in the same month.
The first quarter of 2025 saw 10 investment trusts being liquidated, including Henderson Opportunities and Keystone Positive Change, two of the 'Saba seven' investment trusts targeted by Saba Capital.
Richard Stone, the chief executive of the Association of Investment Companies (AIC), stated that boards have been engaging with shareholders and considering options to maximize value. Brodie-Smith mentioned that Saba Capital has been influential in 2025, but the industry has been proactive with buybacks, mergers, and other activity for the past couple of years.
Investment trusts continue to be popular for long-term, capital-intensive projects like renewable energy infrastructure or venture capital, which are highly rates-sensitive. However, as interest rates rose in 2022, investment trust discounts widened and have remained in double digits since then.
Despite this, discounts narrowed in 29 of the investment trust sectors tracked by the AIC, and have only widened in seven. This trend suggests a more positive outlook for the investment trust sector moving forward.
[1] Source: Association of Investment Companies (AIC) [3] Source: Financial Times, 2025 (accessed on 1st July 2025)
- The increased activity in investment trusts, such as share buybacks, mergers, and acquisitions, can be linked to the narrowing of discounts across many sectors, particularly in the Property – UK Commercial and Residential sectors.
- Investment trusts, like Urban Logistics REIT and Care REIT, have benefited from the surge in buybacks due to the increasing potential return on investment as discounts have narrowed.
- Some investment trusts are strategically reducing share count by engaging in buybacks, which could potentially improve the efficiency of their capital structure and benefit shareholders.
- The trend of investing in long-term, capital-intensive projects like renewable energy infrastructure or venture capital continues to be popular, despite interest rates rising in 2022, as investment trust discounts have narrowed in many sectors, suggesting a positive outlook for the future.
