Editor Insights

Investment Companies: A Great British Success Story

Sub-scale funds leaving the market, not the only game in town in London’s investment co. space. If the no. of trusts in the FTSE100 is anything to go by, larger funds are going from strength to strength: Polar Capital Technology (PCT) and AllianceWitan (ALW), the latest to gain FTSE100 promotion. With multiple funds in the FTSE250 with multi-billion market caps, chances are they won’t be the last.

By Frank Buhagiar

The Great British Success Story label for investment companies is not referring to those halcyon days at the beginning of the decade when IPOs (Initial Public Offerings) of alternative funds investing in weird and wonderful assets such as battery energy storage projects, life sciences parks, hydrogen or even space were aplenty. Or even when Scottish Mortgage’s (SMT) share price could do no wrong and powered ever upwards – over the 10 years to 30 September 2021, SMT’s net asset value (NAV) per share increased by +1,072% versus a +275% increase in the FTSE All-World index (both in total return terms) according to the global fund’s interim management report of 08 November 2021.

No, Great British Success story refers to the here and now. That might seem somewhat out of kilter with what’s been going on in the sector these past few years. After all, not a week goes by it seems without a fund announcing plans to wind down, buy back shares, launch a tender, hold a continuation vote, cut its fees or introduce some other mechanism to tackle a gaping share price discount to net assets or to fend off the unwelcome attention of an activist investor. Fair to say a large number of these funds are on the small side, believed to be sub-scale and therefore not considered suitable by super-sized wealth managers, themselves the product of their own wave of corporate activity and consolidation.

Sub-scale funds winding up or being taken over is not the only story playing out in London’s investment company sector, however. Another is at work, one that is perhaps flying under the radar – growing representation of investment companies in London’s largest stock market indices, specifically the FTSE 100 and FTSE 250.

Take the FTSE 100. More and more funds are being promoted to the top-tier index. Polar Capital Technology (PCT), the latest to gain entry earlier this month. It’s been a relatively rapid rise for the trust. As per the Company’s press release of 3 February 2025 the fund was launched in 1996 as the Henderson Technology Trust. Management of the fund was transferred to Polar Capital in 2001. Five years later, current lead manager Ben Rogoff took over the reins. Under Rogoff and his team’s stewardship, the trust’s assets and market cap have grown to £4.6bn and £4.4bn respectively, enough to warrant inclusion in the FTSE 100.

And from the sounds of it, Rogoff sees more of the same going forwards “More than anything, our inclusion in the FTSE 100 Index reflects the extraordinary nature of technology, its ability to reinvent industries, create massive new markets and drive superior returns for investors. Technology has conquered distance, connected billions and democratised knowledge. Today, rapid innovation is propelling AI towards superhuman capability. While market fluctuations are inevitable, PCT is well positioned for the AI-era which we expect to be one of the most exciting and transformative investment opportunities of our lifetimes.”

PCT isn’t the only investment company to gain promotion to the FTSE 100 in recent months. October 2024, saw Alliance Witan (ALW) enter the index following the tie-up between two globals, Alliance and Witan, to create a £5bn plus fund. June 2024 saw LondonMetric Property (LMP) achieve the same feat after a run of acquisitions. There have been others too. The world’s oldest investment trust, F&C IT (FCIT), won promotion in September 2022. December 2020, it was the turn of Bill Ackman’s Pershing Square Holdings (PSH). A steady increase in the number of FTSE 100 investment trusts then. Today, if you include the three real estate investment trusts (REITs), there are no less than nine funds in the FTSE or to put it another way almost 10% of the UK’s number one index are investment companies:

FundMarket CapSector

3I Group (III)£39.5bn Private Equity

Alliance Witan (ALW)£5.2bn

GlobalBritish Land REIT (BLND)£3.7bnProperty

F&C (FCIT) £5.7bn

Global Land Securities (LAND)£4.3bn

PropertyLondonMetric (LMP)£3.9bn

PropertyPershing Square (PSH) £8.1bn

North AmericaPolar Capital Tech (PCT) £4.4bnTechnology

Scottish Mortgage (SMT)£13.6bn Global

And chances are, the number of investment companies in the FTSE 100 will continue to grow. That’s because there is a healthy smattering of funds with multi-billion-pound market caps in the FTSE 250 chomping at the heels of the smallest FTSE 100 companies.

There’s yet another property company, warehouse investor Tritax Big Box (BBOX), on a £3.7bn market cap. Then there is JPMorgan Global Growth & Income (JGGI) with a soon-to-be be increased £3bn market cap once its latest acquisition – Henderson International Income (HINT) – completes. If it does, that would be JGGI’s fourth acquisition in three years – JGGI single-handedly doing its bit to solve the sub-scale fund problem at the smaller end of the investment trust spectrum.

3I Infrastructure (3IN), not far behind with a £3bn market cap and that’s despite seeing its share price move from a -2.8% discount to net assets as recently as 1 August 2024 to -14% just six months later.

Petershill Partners (PHLL), another alternative fund on a £3bn-ish market cap. Shares in the Goldman Sachs-backed fund that pioneered investing in middle-market alternative asset managers were the second-best performer in the sector in 2024 with a +68.9% gain.

Flexible investor RIT Capital Partners (RCP) not far behind with its £2.7bn market cap. SMT’s stablemate Monks (MNKS) is next on £2.6bn before the first renewable Greencoat UK Wind (UKW) on £2.5bn, proving not all in the sector have the sub-scale tag.

Private equity fund, HgCapital (HGT) and infrastructure funds HICL Infrastructure (HICL) and International Public Partnerships (INPP) meanwhile all with market caps in the £2.2bn -2.3bn range.

And it’s not just alternatives, conventionals too among the largest in the FTSE 250 including City of London (CTY), JPMorgan American (JAM), Caledonian (CLDN) and Smithson (SSON), all on £2bn market caps.

There’s a whole host of names with market caps just shy of £2bn too – Allianz Technology (ATT), Mercantile (MRC), Renewables Infrastructure Group (TRIG), Templeton Emerging Markets (TEM), Murray International (MYI), Worldwide Healthcare (WWH) and Personal Assets (PNL).

Could go on, but point made – even in today’s challenging higher interest rate environment particularly for the alternatives, London is not short of large-scale investment companies. Some of these large scalers are growing with the help of acquisitions such as JGGI, others just on performance alone such as PCT.

And here’s the nub, with operating companies leaving London’s stock markets either through takeovers or going private or overseas, chances are investment company representation in the larger indices will increase in the years ahead. It’s not impossible that the investment company subsector then could one day be among the FTSE 100’s biggest. If that happens, then the Great British Success Story that is investment companies will no longer be flying under the radar but will be there for all to see.