A year so far in the trust world

August is upon us, and with it, we have now passed President Trump’s tariffs deadline. While it seems that we have found ourselves in a middle ground – with most major economies having negotiated some form of deal with him – the US has still implemented an average levy on trade unseen in almost a century.

Yet, despite the negative headlines, markets have been resilient over the year, with the MSCI All Countries World (ACWI) index up 5.6% year-to-date in sterling terms. Some of this bullishness has thankfully made its way into the investment trust sector, with the average trust reporting underlying net asset value (NAV) growth of 4.3%. More importantly, the average share price discount has narrowed by 3.3% over the period, with the trends in demand and performance explained below.

Performance

Infrastructure securities has been boosted by strong performance of power generation companies – a consequence of the seemingly insatiable demand for power for AI. Setting aside Latin America (just one small trust), the next best sector is European Smaller Companies. Despite the looming spectre of Trump’s tariffs, European small-caps have delivered remarkably strong performance – notably, three of the four trusts feature among the top ten performers year-to-date (excluding those in wind-up).

Several factors underpin this trend: an exodus from US stocks (the MSCI USA smaller companies index has fallen by 3.8% over the year-to-date) into Europe, the comparatively attractive valuations European small caps commanded going into 2025, and the various forms of stimulus implemented in the region over 2025 (led by Germany’s €500bn domestic stimulus package).

Source: Morningstar, QuotedData

Two other noteworthy – and perhaps unexpected – top-performing sectors this year have been China and the UK (including UK All Companies, UK Equity & Bond Income, and UK Equity Income, but unfortunately not – as yet – UK small caps). Both had, until recently, been counted among the laggards of the global equity market.

China’s revival has been driven in part by its AI success with DeepSeek – which reignited interest in the whole Chinese technology sector – and areas such as electric vehicles, alongside an overall rise in Chinese equity market activity. (We covered these factors in greater detail in our recent note on JPMorgan Asia Growth & Income.)

The UK, meanwhile, has seen the FTSE 100 reach all-time highs. Several forces have been at play:

• The UK has been another beneficiary of the shift away from US equities.
• A swift trade deal with President Trump.
• Rock-bottom valuations for UK equities.
• A reduction in UK interest rates.

In addition, standout performances from select UK large-caps, such as Rolls-Royce and BAE Systems, have provided an extra boost.

Discounts

Discount movements have been a largely positive story in 2025, with 36 of the 45 AIC sectors reporting a narrowing in the gap between share prices and NAVs. However, much of this can be attributed to the significant rise this year in the number of trusts being wound up, acquired, or entering a wind-down phase (as discussed in the next section).

The shift has been most apparent in the UK property space, with the UK logistics sector leading the way. Its median discount narrowed by 16% over the year – driven recently by the ongoing bidding war for Warehouse REIT (WHR). Soon, Tritax Big Box REIT (BBOX) will be the sector’s only constituent.

Some of these sectors have seen demand increase organically in 2025. One of the best examples is the Commodities & Natural Resources sector, where the median discount narrowed by 8% over the period. Home to a diverse pool of nine trusts, the sector has delivered some of the strongest NAV and share price performances this year.

• Golden Prospect Precious Metals (GPM) has been the best-performing trust in 2025, so far, reflecting the significant rally in gold prices over the period.
• Other members of the peer group, including CQS Natural Resources (CYN) and Baker Steel Resources (BRST), reported double-digit returns of 15.4% and 16.5% respectively.

Despite the standout performance of European small-caps, it was the Indian Equity sector that recorded the largest nominal discount narrowing of the regional trusts. While the MSCI India index fell by 6.9% in 2025, measures implemented by boards within the sector helped JPMorgan India and abrdn New India achieve significant discount reductions. JPMorgan India adopted a series of measures to address its discount, including an oversubscribed tender offer. abrdn New India accelerated buybacks and improved its fee structure, further supporting its narrowing discount.

Windups continue

My colleague James Carthew recently wrote about the state of the investment trust sector, highlighting the number of trusts that have disappeared – 16 had wound up in 2025 at the time of his article. Sadly, the trend has continued, with Syncona (SYNC) announcing its wind-up and Henderson European merging into Fidelity Europe.

Several other trusts have brought forward initiatives that have significantly reduced their size:

• Polar Capital Global Financials (PCFT) completed a 100% tender offer in June, shrinking its share capital by 44%.
• Following negotiations with activist investor Saba Capital, CQS Natural Resources also undertook a 100% tender offer, reducing its size by 46%.
• European Smaller Companies Trust (ESCT) carried out a tender offer in 2025, cutting its share count by 42%.

Other trusts have also announced future tenders:

• JPMorgan India (JII) will offer a 100% tender in 2028.
• As part of its re-invention, BlackRock American Income (BAIT) will also offer investors a 100% tender in May 2028 if it fails to beat its benchmark by 50bps (annualised).

In addition, this week we have seen Bellevue Healthcare (BBH) announce a strategic review which may see that trust taken over, Utilico Emerging markets (UEM) introduce a conditional tender offer, and River UK Micro Cap (RMMC) offer a 100% exit in 2028 if it hasn’t returned at least £10m via its annual compulsory redemption mechanism before then.