This publication talks to a private investment house and wealth management group about the UK’s investment trusts sector, one that has been roiled by the attentions of activist investors targeting a field seen as a “sleepy backwater.”
The drive by transatlantic activist investor Saba Capital to
shake up the venerable UK listed investment trust sector may have
ruffled feathers, but it illustrates a pressing need for the
sector to consolidate, industry figures say.
Saba, with offices in London and New York, invests in UK trusts
across public and private funds; it has collective exposure of
more than £2 billion ($2.7 billion) in as many as 50
London-listed companies, Bloomberg reported on 16
October. Saba’s founder, Boaz Weinstein, has blazed a trail in
trying to buy and shake up a sector that dates back to the
1860s.
In December 2024, Weinstein started to try to take control
of seven UK trusts, asking many of them to fire directors and
install candidates he backed. These attempts failed but, as
the newswire reported, some of the targeted trusts have made
changes that Saba wanted anyway.
Whilst having some concerns on the shorter-term motivations of
many activists, this willingness to shake up a “sleepy backwater”
is applauded by Alec Letchfield, chief investment officer and
partner at Hansa Capital Partners, a UK-based private investment
house backed by the Salomon family. He spoke to
WealthBriefing, which recently visited him at his
Mayfair offices in London.
Hansa has consolidated two closed-ended structures, Hansa
Investment Company Ltd and Ocean Wilsons Holdings Ltd, into a
single portfolio. The investment company has a portfolio with
more than £1 billion net asset value (NAV) and, importantly,
average daily traded volume has improved.
“This gives us scale…it gives us liquidity,” Letchfield
said.
The team want Hansa’s share price discount to NAV to narrow
in from around 40 per cent. While NAV discounts can attract
value-hunting investors, persistent discounts are a
turnoff; trust boards have various ploys to narrow them, for
example by repurchasing shares and consolidation.
The drive to meld investment trusts comes at a time when London’s
stock market has been beset by worries about low liquidity and a
slow market for initial public offerings.
In its figures for the first six months of 2026, the Association
of Investment Companies (AIC) said there were three mergers,
three acquisitions and six liquidations of investment trusts,
compared with two mergers, four acquisitions and 11 liquidations
a year earlier. A total of £575 million was raised by existing
investment trusts (secondary fundraising) in the first half of
2026, more than double the amount raised in the same period of
2025 (£221 million). The largest amount was raised by Seraphim
Space Investment Trust (£137 million) followed by two trusts in
the debt sectors, TwentyFour Income Fund and Invesco Bond Income
Plus raised £98 million and £85 million respectively, AIC
said.
The number of investment trusts has been falling. There were 279
trusts on the London market at the end of May 2025 compared
with 337 names three years earlier, stockbroker and wealth
manager AJ Bell noted in June this year, citing figures from the
AIC. This equates to a fall of 17 per cent from May
2022.
In a commentary about investment trust consolidation on 24 June
this year, Dan Coatsworth, head of markets at AJ Bell, said: “Takeovers
are also being driven by various sub-scale investment trusts
realising they either need to get bigger or admit defeat and
return money to shareholders. For years the investment market has
been full of sub-£200 million trusts that didn’t gain traction.
Many investors, particularly institutional ones, won’t touch
trusts below a certain size, so trust boards have now been forced
to make hard decisions.”
It would appear that fixing low liquidity will help investment
trusts tell a positive story more effectively. The AIC
argues that recent data it has collected shows that listed
investment companies outperform open-ended fund
structures. In 28 out of 32 cases (88 per cent) where an
investment trust and an open-ended fund have had the same fund
manager for the past 10 years, the investment trust has
outperformed.
Mismatch problem
A challenge for trusts is that if they don’t consolidate, the
sector will be so fragmented that each trust will be too small to
absorb the kind of money that wealth managers, which are
consolidating, want to deploy.
”The main advantage of investment trusts is the fact they do not
have to manage the daily liquidity requirements of investors
subscribing and redeeming units in open ended funds,” Jonathan
Moyes, head of investment research, and lead portfolio manager at
the Wealth Club Portfolio Service, told this publication. “This
is a significant advantage. It means trusts can invest in more
illiquid assets, such as smaller listed companies and private
market assets.”
“A key issue for investment trusts in recent years has been the
consolidation of the wealth management industry. The largest
wealth managers are now a great deal larger, and so is their
average cheque size,” Moyes said. “A firm managing north of £25
billion would need to buy £500 million of an investment trust if
it wished to give all clients a 2 per cent allocation. This is
simply not possible in any reasonable timeframe,” he
continued.
“This is putting investment trusts and overseas listed companies
out of reach of the average client within the UK’s largest wealth
managers. This trend is not reversing,” Moyes said.
Such problems should be overcome because investment trusts, while
not always given the publicity they deserve, can deliver what
investors seek, he said.
“All things being equal, investment trusts typically come out on
top when comparing their longer-term track records to sister
funds that run the same strategy under an open-ended equivalent.
In short, investment trusts have the potential to add a great
deal of value and diversification to an investment portfolio that
would otherwise be restricted to highly liquid publicly traded
assets,” Moyes said.
Access, evergreens and liquidity
A regular refrain in the wealth sector around the world in recent
years has been the need to give affluent and HNW private clients
access to private market areas such as venture capital, private
equity and credit. This drive to “democratise” access has spawned
the arrival of “evergreen,” semi-liquid, perpetual
structures from the likes of Blackstone, Carlyle and KKR, among
others.
But it could be argued that evergreen funds are “reinventing the
wheel” because investment trusts that hold underlying portfolios
of private investments give ordinary users access by buying
shares.
Hansa’s Letchfield argued that the evergreen model is
“intrinsically flawed” because of the mismatch, as he sees it,
between the promise of offering regular liquidity and the
underlying assets.
Evergreen funds don’t come with the drawdowns, capital calls,
exit deadlines and other traditional features of private market
entities. In the
case of one Blackstone fund, it allows 2 per cent to a
maximum of 5 per cent of the fund’s value to be liquidated per
quarter.
Letchfield said that such open-ended models for holding private
markets are a fair-weather option and come with risks.
“They work perfectly so long as the sky is blue,” he said. “It is
exactly why these things should be done in these closed end
structures.”
Raising the profile
Letchfield said he thinks the investment trust industry needs to
make more positive noises and raise investors’ awareness.
“I think the sector has become a sleepy backwater, despite the
inherent attractions of the investment trust structure” he
said.
While for a long time Hansa, founded in 2000, had
not communicated its message to the outside world by
marketing, it has decided to change its approach. (The fact that
it spoke to WealthBriefing is, so this news service was
told, part of the shift.)
Letchfield said that part of the attraction of Hansa is that
the HICL company is backed by the Salomon family, and
listed. This means that it is well suited to
making patient, illiquid investments into cutting-edge
startups and established businesses in areas such as space
and AI. Examples of this are the company’s holdings in
venture capital groups such as Founders Fund and Khosla Ventures,
as well as biotechnology groups such as OrbiMed.
There is strong alignment between end investors and the Salomon
family and other figures in the Hansa business. If shareholders
aren’t happy, neither are those in the business, Letchfield
said.
The combined portfolio, according to a presentation in October,
held 71 per cent of investments in country and thematic funds, 8
per cent in direct global equities, 10 per cent in “diversifying
assets,” 8 per cent in private assets, and 3 per cent in
cash.
The Hansa business, whose name is a nod to the Medieval period of
the Hanseatic League of northern Europe, dates its origins to the
Alto Parano Company of 1912, later changing to the Scottish &
Mercantile Company.