While most UK investors in 2026 are still arguing about active funds versus passive ETFs, a quieter group has been buying something the textbooks barely mention: investment trusts trading at a discount to net asset value. Several flagship UK trusts are currently changing hands at 10-15% below the value of their underlying holdings, and a handful of well-known names sit nearer 20%. For a long-horizon investor inside a Stocks and Shares ISA or SIPP, that gap can be the difference between an ordinary decade and an exceptional one.
What an investment trust actually is
An investment trust is a closed-ended fund listed on the London Stock Exchange. You buy shares the same way you buy Vodafone or Tesco — through your platform, at a market price, on demand. The trust's manager runs a portfolio of underlying assets (shares, property, infrastructure, private companies). Each share represents a slice of that portfolio.
Crucially, the share price and the value of the underlying portfolio per share (the net asset value, or NAV) are not the same number. They float independently. When demand is high, trusts trade at a premium. When demand is low — or when a sector is unloved — they trade at a discount.
Why discounts have widened in 2026
Three forces have pushed UK investment trust discounts to unusually wide levels. First, higher gilt yields between 2023 and 2025 made any income-paying alternative look less special, and many UK trusts are income-focused. Second, retail platform consolidation and rising platform fees nudged some smaller investors toward simple global trackers. Third, a wave of cost-disclosure rule changes briefly inflated reported fees on trusts that hold private assets, scaring off model-portfolio buyers.
None of those forces affect the actual cash flows or assets the trusts hold. They affect the share price. That is precisely the kind of dislocation patient capital is rewarded for.
How the discount creates two layers of return
Buying at a discount gives you two potential gains, layered on top of one another:
- The underlying portfolio return — dividends, share price growth, property income
- The discount narrowing — if a trust trades at a 12% discount and the discount eventually closes to 2%, the share price gains roughly 11% before any portfolio movement
You can also get burned in the other direction: discounts can widen further before they narrow, and some structural discounts never fully close. This is not free money, it is a tilt in your favour.
The boards have got more aggressive
One thing that has changed in the past two years is how UK trust boards behave. Under pressure from activist investors and the AIC, boards now act faster on persistent discounts. Buybacks have stepped up sharply — several trusts repurchased more than 10% of their shares in the year to March 2026. Some boards have triggered managed wind-downs or merged smaller trusts into larger ones. Each of these mechanisms is, in effect, a way of returning the discount to shareholders.
Sectors where the discount opportunity is most pronounced
Without naming individual tickers, the patterns in 2026 are clear:
- UK equity income trusts — many have decades of consecutive dividend rises (the AIC "Dividend Heroes" list) yet trade at meaningful discounts
- Renewable infrastructure — solar, wind and battery trusts were repriced sharply when gilt yields rose, and several still trade well below NAV
- Private equity trusts — wide discounts despite strong distributions and proven track records
- Property (REIT-style) trusts — selectively, especially specialist sub-sectors with long index-linked leases
- Global generalist trusts — a small number of long-established names rarely trade this cheap
The risks investors should weigh honestly
Discount investing is not a free lunch. Three real risks apply.
Gearing. Investment trusts can borrow to invest. In a falling market, gearing amplifies losses on the way down as well as gains on the way up. Always check the gearing percentage on the factsheet.
Sector concentration. A 15% discount on a single-sector trust is less attractive if you already own that sector elsewhere in your portfolio. Discounts narrow on a portfolio basis, not in isolation.
Liquidity. Smaller trusts can have wide bid-offer spreads. If you are dealing in smaller sizes inside an ISA, the spread can eat several percent of any discount you thought you were capturing.
How to use trusts inside ISA and SIPP wrappers
UK investment trusts sit comfortably inside a Stocks and Shares ISA, where dividends and capital gains are tax-free, and inside a SIPP, where they grow free of UK tax until drawdown. The 20,000 ISA allowance for 2026/27 and the higher SIPP annual allowance for most earners give plenty of room. Many platforms — Hargreaves Lansdown, AJ Bell, Interactive Investor, iWeb, Trading 212 — list the full UK trust universe with normal share-dealing fees.
For small monthly contributions, watch dealing charges; flat-fee platforms tend to win for trust investors above roughly 25,000-50,000, while percentage-fee platforms can be cheaper for very small portfolios.
A simple framework before buying
- Check the 5-year and 10-year average discount on the AIC website
- Compare today's discount to that average — is it genuinely wide, or just slightly?
- Read the latest annual report — gearing, fees, dividend cover
- Confirm the sector fits a gap in your portfolio, not a duplication
- Plan to hold for at least 5-7 years; this is not a trade
The bottom line
UK investment trusts are not new and they are not exciting. But the combination of unusually wide discounts in 2026, more activist boards, and tax-free wrappers like the ISA and SIPP gives patient British investors something genuinely rare: a chance to buy decent businesses and infrastructure at well below the price the underlying assets would fetch in a private sale. For the long-horizon investor willing to ignore short-term noise, that is the kind of edge worth understanding.