Investment trusts explained
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Quick answer: Investment trusts are UK closed-ended companies listed on the stock exchange — they can use gearing and hold illiquid assets, often trading at a discount or premium to net asset value.
Unlike open-ended funds, investment trusts have a fixed share count and a board of directors. They have existed for over 150 years and remain popular for global equity, infrastructure and private assets. This guide explains structure, pricing and tax.
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Read the full investing & ISAs guide →Primary source: www.moneyhelper.org.uk/en/savings/investing
Structure and pricing
When you buy an investment trust share, you buy from another investor on the stock exchange — the trust does not create or cancel units daily like an OEIC. This closed-end structure is why the share price can diverge from net asset value.
If demand is weak, shares may trade below NAV (a discount). A 10% discount means you buy £1 of assets for 90p, but discounts can widen further.
Gearing and risk
Boards can borrow to increase exposure. Gearing boosts returns in rising markets but magnifies falls — check the gearing ratio in factsheets.
Trusts can invest in illiquid assets like private equity or property that open-ended funds struggle to hold, but liquidity risk remains for shareholders. You rely on other investors wanting to buy your shares when you need to sell.
Tax and wrappers
Hold investment trust shares in a stocks and shares ISA to shelter dividends and capital gains. Outside ISAs, report gains above the £3,000 CGT annual exempt amount.
Some trusts publish tax data on interest and dividend splits to help higher-rate taxpayers report accurately. Check the trust's website each year for the tax report before completing your Self Assessment.
Common questions
Are investment trusts safer than funds?
Not necessarily. Gearing and discounts add risks. Diversification and trust quality matter more than the legal structure.
How do I buy them?
Through share-dealing platforms and some ISAs. You pay share dealing spreads and platform fees like any listed stock.
What is a dividend hero?
Industry nickname for trusts with long records of rising dividends — useful for research, not a guarantee of future payouts.