Time for investors to return to these high-yielding investment trusts?

The search for diversifying assets that aren’t bonds or gold can lead investors down some strange avenues, from backing absolute return vehicles to the leasing funds that performed well in the March sell-off. 

But it’s worth remembering one well-established asset class that does have some potential, even if it has been in for a battering in recent years. 

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Property has had a painful time on the back of interest rate rises but still has some appeal, from its income generation to some resistance against the effects of inflation. 

It could still play a role in portfolios, either as a source of income or as a potential source of diversification, although not many fund options remain available after a period of rampant merger and acquisition activity. 

This analysis will ignore open-ended property funds, which in the past have attempted to offer investors ready liquidity but failed to do so and have a times put fund suspensions in place thanks to the inherent difficulty of selling what they hold (assets such as office buildings) quickly.  

Instead we look at the companies and investment trusts now on offer – both those with a diversified, “generalist” approach to the asset class and more specialist names.

Slim pickings, but some potential 

Property trusts have aggressively consolidated in the last few years and as Hawksmoor senior fund manager Daniel Lockyer puts it: “The answer to ‘What’s left?’ is ‘Not much’.”

Just a handful of diversified UK property funds remain, for example, while there’s a good chance that further M&A activity could occur. 

Source: AIC, 21/04/26. Ordered by one-year share price total return. Past performance is not a guide to future performance.

Our table shows most of the names from the Association of Investment Companies (AIC)’s UK - Commercial Property sector, with two niche trusts and one fund in wind-down excluded from the list. 

The table tells us a few broad facts: that shares have mainly enjoyed a rally in the last year, that yields do look attractive relative to both bonds and equities, but that these trusts still look pretty small in a world where some institutions need a fund to have a market cap of around £500 million in order to invest.  

That explains why more mergers could be on the cards, and there has been news on that front.

This week, we saw a potential tie-up between two names in the table, AEW UK REIT Ord (LSE:AEWU) and Alternative Income REIT Ord (LSE:AIRE), fall through.

As the former put it in a market statement: “It was established during the course of due diligence that agreement on certain key matters could not be concluded.” 

• ii Top 50 Fund Index: most-bought funds, trusts and ETFs in Q1 2026
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

We also had an unusual update from Picton Property Income Ltd Shs GBP (LSE:PCTN), which is up for sale, in March, where the board confirmed that a “consortium” of LondonMetric Property (LSE:LMP) and Schroder Real Estate Invest Ord (LSE:SREI) had bid for it. 

Industry specialists don’t know exactly what might happen in the case of Picton Property Income, with Lockyer noting: “I don’t think it’s workable, the three-way merger. There’s a cleaner option that makes a lot of sense – Picton and Schroder Real Estate getting together and Picton taking over the new entity.” 

But, with the caveat that the sector could be due further disruption, some of these names have appeal. 

Which names stand out? 

The diversified funds invest in physical assets across different property subsectors, and the mixture they tend to favour has changed over time.  

Some had substantial exposure to the high street and to offices when the pandemic hit, with bad results.

In recent years we have seen many of the diversified funds focus more on industrial assets and retail warehouses, which have enjoyed stronger demand and less uncertainty. 

The investment industry tends to make a distinction between real estate investment trusts whose portfolio is run by an external manager and internally managed property companies.  

And while we focus on the trusts here it is worth noting that Alan Ray, investment trust research analyst at Kepler, first points to the success of internally managed LondonMetric Property (LSE:LMP). 

It has swallowed up multiple funds over the last few years, has a market capitalisation of around £4.5 billion and sits in the FTSE 100.  

“One of the challenges in [achieving] diversification in property is that it costs a lot of money and can cost tens of millions [to make an investment],” says Ray. 

He adds: “LondonMetric has become probably the 2020s archetype of a diversified REIT. It’s not on a big discount but it has the scale to be diversified, has an attractive yield, good dividend cover and it’s tradeable.” 

• Ian Cowie: how to benefit from rising power prices
• Where to invest in Q2 2026? Four experts have their say

LondonMetric’s acquisitive tendencies have kept it busy in recent times, with a trading update last week pointing to the successful integration of one acquisition, the Urban Logistics Reit, and the sale of 72 assets held by another acquisition, LXi Reit, for £298 million. 

Within the trust space Ray does like Schroder Real Estate, which has a spread of subsector exposures.

Industrial assets accounted for around half the portfolio at the turn of the year, with office buildings on a 23% weighting, retail warehouses on 13% and retail on 6.6%. The fund also has a spread of exposure to different parts of the UK. 

Ray likes the team’s focus on upgrading its buildings to make them more environmental and efficient, noting: “It’s explicitly spending money to upgrade its buildings and there’s evidence that it can grow rents.”

The fund also has an attractive dividend yield, although its debt levels do look high. 

He also points to an “old reliable” from another sector in the form of TR Property Ord (LSE:TRY).  

The fund buys shares in property companies and mainly does without exposure to physical assets, and tends to focus on the European market.  

It’s a pretty diversified fund with a good spread of exposures to different regions and subsectors, has a 4.8% yield and should be nimble thanks to its focus on shares.  

Ray views it as a good “one-stop shop” for investors.

He also notes that it’s “a good place to find out about property”, with the trust’s annual reports likely to have some nuggets of wisdom for those interested in the sector.

The trust’s last report does indeed have plenty of information about the state of consolidation in the sector. 

On the generalist front, Lockyer likes Custodian Property Income REIT Ord (LSE:CREI), which focuses on smaller assets and has hundreds of properties.

He doesn’t view the trust as too vulnerable to a merger or buyout, given that its founder, wealth firm Mattioli Woods, has a substantial shareholding. 

Specialist names 

Specialist property funds can come with a greater level of risk and reward.

That’s clear from the big ups and downs experienced by logistics (and e-commerce) play Tritax Big Box Ord (LSE:BBOX) in recent years, as well as by the devastating effect of outlined legislative changes on Ground Rents Income Fund Ord (LSE:GRIO). 

But some names currently stand out. There’s Supermarket Income REIT REIT (LSE:SUPR), which has some inflation linkage and a well-backed dividend with a yield north of 7%, as well as a focus on a sector currently doing well. 

A very different play is Target Healthcare REIT Ord (LSE:THRL), which focuses on modern, premium care homes and has a 5.5% share price dividend yield.

• Fund Focus: the investment trusts facing a crunch vote
• The 10 highest-yielding equity investment trusts

As Lockyer puts it, the fund does capture a “structural growth theme” in the form of the ageing population. 

With both Supermarket Income Reit and Target Healthcare Reit, Lockyer cautions that the return mostly comes from yield, making them very sensitive to shifts in interest rates and bond yields. “They will struggle if yields rise as they did in March,” he says. 

There’s also a case for Tritax Big Box REIT, with its focus on logistics but also, more recently, on data centres.

The trust’s shares trade on a roughly 16% discount to NAV, a long way down from the big premium they commanded back in 2022. Its yield comes to around 5%.