Five years on: how 16 investment trust IPOs have fared

An ICEYE Gen4 SAR satellite over Brazil. ICEYE is one of Seraphim Space Investment Trust’s top 10 portfolio holdings. The trust, which launched in 2021, describes ICEYE as ‘building a satellite-based information service, providing the world with access to near-real-time imagery from space’. Picture credit: ICEYE.

2021 was a record-breaking year for new investment trust listings (IPOs), with no less than 16 coming to the market, raising more than £3.8 billion between them.

But five years later it is clear that, for many of those launches, things did not go according to plan.

• Invest with ii: Buy Investment Trusts | Top UK Shares | Open a Trading Account

As of end August 2026, just six are still trading, according to data from the Association of Investment Companies (AIC). The assets of another two are being sold off - a process known as realisation - as part of the closure process. The rest have been acquired, taken private or liquidated.

What went wrong? Was it all a matter of unfortunate timing and circumstances beyond anyone’s control?

To a large extent, yes it was. Five years ago we were still living in a longstanding low interest rate world and most of the funds that launched in 2021 thrived in this environment. But the end of that era was approaching, and higher rates and inflation were on the horizon.

Almost all the IPOs were specialist vehicles investing in illiquid assets, for which the investment trust structure is very well suited.

However, Alan Ray, a research analyst at Kepler Partners, makes the point that the list “marks a distinct shift in investor appetite further up the risk curve”, as expectations grew of rising inflation and interest rates.

For instance, many focused on infrastructure and renewable energy infrastructure, aiming, as Emma Bird, head of investment trust research at Winterflood, observes, “to offer an attractive dividend yield, catering to investors searching for income in a low-rate world”.

But these new funds were “biased to more operational infrastructure businesses rather than the lower-risk infrastructure contracts we’ve come to associate with the sector,” Ray says.

Growth capital and private equity was another key trending theme among the IPOs, “where valuations were supported by future cash flows not being discounted at high rates”, according to Bird. Again, these sectors offer the potential for greater real returns - and concomitant risk - than conventional equity funds.

As Ray argues: “Investors were positioning themselves to take more equity risk, in anticipation that a long-term focus on real returns was becoming more important as inflation, and rates, moved higher.”

The Russian invasion of Ukraine dramatically kickstarted the unravelling process in 2022, leading to spiralling inflation and base rates and a rapid shift in investor sentiment. That in turn pushed many of the new trusts’ share prices from a premium to net asset value (NAV) to a wide discount.

• Ian Cowie: the tonic to cure tech troubles
• Top 10 most-popular investment trusts: August 2026

Those discounts meant that - unlike IPOs earlier in the low interest rate era - they were unable to scale up through secondary fundraises because they were simply not very attractive to investors.

“Many were left as poorly performing, sub-scale funds, sometimes with specific issues in the portfolio,” explains Bird. Those invested in capital-intensive, highly levered and early stage assets were particularly vulnerable.

It was undoubtedly a tough time for all investment trusts, with interest rates rising at the fastest rate for 40 years in 2022 and 2023, from a low of 0.1% at the start of 2022 to 5.25% in August 2023. 

Source: theaic.co.uk/Morningstar. Past performance is not a guide to future performance.

Other headwinds

That dire backdrop was compounded by various other factors. “This, alongside regulatory issues with cost disclosures, the dominance of large US tech companies and the UK market falling from favour, impacted demand for investment trusts,” says Annabel Brodie Smith, communications director at the AIC. The average discount widened to 18.8% at the end of October 2023 as a consequence.

For many of 2021’s IPOs the writing was on the wall, and a wave of M&A activity, acquisitions and closures has taken place over the past couple of years.

In addition, the fact that many large wealth managers have turned their backs on all but the largest investment trusts because of liquidity issues hasn’t helped, contributing to the downward pressure on discounts.

“It’s quite difficult for trusts that invest in illiquid assets and may also use gearing to instantly start buying shares back when a discount develops,” says Ray. “The money has to come from somewhere, and if it takes a long time to sell assets and there is already gearing, this can be a drawn-out process.”

He argues that some of the IPOs that are closing have had to make that decision because of this, rather than due to a significant failure in their portfolio – VH Global Energy Infrastructure Ord (LSE:ENRG) being a clear example. 

A scattering of success stories

Nonetheless, not every launch from the class of ’21 has foundered; indeed, a few have done pretty well given the challenges of the last few years.

Growth Capital trust Seraphim Space Investment Trust Ord (LSE:SSIT) has seen its share price rise by 74% since launch in July 2021 (to XXXX). It was a tricky start: SSIT underdelivered at IPO and was then hit hard as investors rotated out of early stage assets, leaving the shares on a hefty discount of more than 70% in 2023.

However, the portfolio companies performed well, and the dual tailwinds of increases in defence spending and space tech advancements helped to turn its fortunes around over the past year or so.

SSIT is now one of a small handful of trusts trading on a premium, and was able to  raise a further £137 million of capital earlier this year.

• Investing in space: funds, trusts, and ETFs offering a route in
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Another slow-start winner has been Cordiant Digital Infrastructure Ord (LSE:CORD), which runs a portfolio of data centres and other “internet plumbing”, as Ray styles it.

“It’s easy to see how this has started to command more attention,” he notes. As a result, “after a period of being on a very wide discount, CORD has moved to a less extreme discount now – still attractive to investors, but at a level where the pressure on the management is alleviated and they can devote more attention to managing the portfolio.”

The trust targets 9% plus net annual returns through a combination of income and capital growth – but as Bird points out, in practice it has exceeded its target, with NAV returns of more than 11% annualised from launch to end March 2026.

In contrastLiteracy Capital PLC (LSE:BOOK), an unusual private equity trust that focuses on smaller growth businesses rather than the typically larger ones of its sector peers, had a strong start after IPO. It traded on a premium on the back of a number of exits and valuation uplifts within the portfolio.

“More recently, not much has gone wrong but there has been less news flow; the ‘gravitational pull’ of wide discounts elsewhere in private equity has exerted itself, and BOOK has seen a premium turn to a discount,” explains Ray.

That now stands at around 35%, reflecting the pain suffered by the wider private sector recently. Of BOOK’s 14 peers in the sector, all but two are trading on discounts upwards of 20%. Yet BOOK has nonetheless delivered a very respectable 70% return since launch in June 2021.

The future for IPOs

Discounts are key to what happens as far as further investment trust IPOs are concerned.

It’s not hard to see the logic dampening appetite for new launches: basically, why would investors bother participating in an IPO if they have a choice of similar existing trusts on attractive discounts?

Moreover, as Ray stresses, “unlike for an open-ended fund, where you can roll out a new launch over months, for an IPO you need to get everyone to invest at the same time for it to work.” That’s challenging at the best of times and almost impossible when discounts are substantial, he adds.

Given that an estimated 90% of trusts still trade at a discount, there’s clearly a way to go, then.But there is some scope for optimism.

• Ten ‘alternative’ funds with big yields
• What global bond shock means for UK investors

Brodie-Smith notes that recent investment trust performance has been strong, with the average trust delivering 19% over the last 12 months and 152% over 10 years, while average discounts have come in to around 11%.

In addition, she says: “Fundraising is picking up, a solution to the cost disclosure issue is in place and more marketing to increase awareness of investing and investment trusts is on its way.”

Bird also believes new launches could pick up, once the political and economic outlook improves, gilt yields fall and investors start to feel more confident again.

But she anticipates any new funds will need to be specialists with notable differences from existing peers, and for whom the closed-ended structure of investment trusts is particularly beneficial.

Ultimately, good performance by investment trusts and narrowing discounts will improve the prospect of new entrants to the market. As things stand, though, global geopolitical tensions and bond market stress may be powerful deterrents for some time to come.