Retail Investors Surge to Become Dominant Force in UK Investment Trust Market
In a significant shift within the UK's financial landscape, retail investors have firmly established themselves as the largest group of investment trust owners, according to the latest comprehensive analysis. This development comes as wealth managers and institutional investors strategically reduce their holdings, redirecting capital toward alternative markets.
Retail Investment Boom Driven by Favorable Conditions
As of 2025, retail investors collectively hold an impressive £50.5 billion in investment trusts, representing a substantial 37 per cent stake in the sector. This marks a notable increase from five years prior, when retail holdings stood at £40.3 billion, accounting for 34 per cent of the market. The growth spans various investment channels, including digital platforms, savings schemes, and traditional paper share certificates held by individuals.
The number of shares owned by retail investors expanded by 4.6 per cent, while the total value of their holdings surged by 11.5 per cent. Financial analysts attribute this upward trajectory to several key factors: persistently lower interest rates, with the Bank of England anticipated to implement further reductions from the current 3.75 per cent benchmark in the coming spring; enhanced dividend policies that boost returns; and increased media engagement that has made investment trusts more accessible and appealing to individual investors.
Institutional and Wealth Manager Retreat Creates Opportunities
In stark contrast to the retail sector's expansion, both institutional investors and wealth managers have been gradually reducing their exposure to investment trusts. Institutional investors now represent 27 per cent of the market by value, with holdings totaling £35.8 billion, up from £33.3 billion in 2020. However, the number of shares held by institutions decreased by 5.4 per cent last year, though the value of these shareholdings rose by 5.5 per cent, indicating a strategic shift toward maintaining fewer, higher-value assets rather than maintaining extensive portfolios.
Wealth managers similarly reduced their share numbers by nine per cent, yet saw the value of their holdings increase by 4.4 per cent to £38.3 billion. This sector is increasingly exploring alternative investment avenues, including private equity, hedge funds, renewable energy projects, and property trusts, reflecting broader diversification strategies.
Industry Consolidation and Evolving Communication Strategies
Ongoing consolidation within the wealth management industry, coupled with rising investment minimums, has placed additional pressure on traditional holdings. Many firms are now pursuing growth or merger opportunities to enhance their appeal to retail investors. Jonathan Davis, editor at the Investment Trusts Handbook, emphasized the significance of these trends, stating, "After a turbulent but transformative period, 2025 marked a strong comeback for investment trusts, rewarding patient shareholders with narrowing discounts, solid returns, and a renewed edge over open-ended funds as the sector evolves to meet a changing investor base."
Davis further noted, "What it shows is that individual investors continue to account for a growing percentage of share registers, while that of wealth managers continues to decline. These two trends, slow but sure, have been running for a few years now. It is one reason why many more trusts are investing time and money in improving their disclosure policies and communicating better what they do across an expanding range of media channels."
The performance metrics underscore this shift, with 80 per cent of investment trusts now outperforming open-ended funds with equivalent mandates, reinforcing their attractiveness to retail participants seeking reliable returns in an evolving financial environment.
