The number of investment trust shares owned by retail investors grew by 42% over the past five years, according to a new report by Warhorse Partners.
Retail investors are now the largest holders of investment trusts, owning 36% of shares in the sector, which are jointly worth £46.9bn.
This group now outranks wealth managers, which own 29% of trust shares, and institutional investors, who own 27%.
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While retail investors upped their buying of investment trusts sizably, the institutional stalwarts dropped their allocations. Wealth managers ownership of the sector fell from 32% to 29% over the past five years as their share value went from £37.8bn to £30.9bn.
Likewise, institutional investors’ ownership fell from 29% to 27% over the period as their shares dropped from £35.1bn to £28.2bn.
Simon Longfellow, consultant to Warhorse Partners, said: “It is a common perception that over the last few years, institutions have been the sleepy, steady holders of investment trusts, with holdings often long forgotten about and little engagement.
“But this section of the market has invested £4bn more in the sector now than in 2019. Activist institutions have also played a significant role in soaking up shares being let go by other owners as they take advantage of discounts across the sector widening.”
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Retail investor may have picked up the slack from institutional buyers over the long term, but even their appetite slowed amid the widening discounts of recent years. In 2024, they increased their buying of investment trusts by a milder 4%.
Georgina Dybvig, partner at Warhorse Partners said: “Despite the pessimism surrounding 2024, this year has shown the continued importance of the retail investor for the investment trust sector.
“The general perception in the market has been that there has been no retail buying of investment trust shares in 2024, and whilst it’s true to say the pace of buying has slowed, it was still a positive year overall.”