Educational, not advice. Savvy Investor Guide is not regulated by the Financial Conduct Authority and we are not financial advisers. Nothing on this site is personal financial advice. This article explains a regulatory proposal; it does not tell you which investment trusts to buy, hold, or sell.
What this article covers: what the FCA’s June 2026 consultation paper CP26/21 proposes for investment trusts, the Saba Capital campaigns that prompted it, and what the changes would mean for ordinary shareholders.
What it does not cover: which investment trusts to own, how to value a trust, or how to trade one. For how trusts sit alongside funds, see our index funds vs mutual funds guide.
Investment trusts are one of the oldest and most useful vehicles available to UK retail investors. Millions of people hold them, often inside an ISA, to get exposure to things that are hard to reach through an ordinary fund: private equity, infrastructure, property, and other less liquid assets. Their structure, with an independent board overseeing an external manager, is meant to keep the manager honest and the shareholders protected.
That structure came under pressure in 2024 and 2025, when the US hedge fund Saba Capital built stakes in a series of UK investment trusts and pushed for sweeping changes, including replacing boards and installing itself or its allies as manager. The campaigns exposed a governance gap: what happens when a large shareholder wants to take control of a trust in ways that may not serve the other shareholders? On 26 June 2026, the FCA responded with consultation paper CP26/21, proposing targeted changes to the listing rules for closed-ended investment funds. This article explains what is proposed and what it means for you.
In short
- The market: around 264 investment trusts, roughly 217 billion pounds in assets (May 2026 data).
- The trigger: the Saba Capital campaigns of 2024 and 2025, which sought to reshape several UK trusts and install new managers.
- Change one: a substantial shareholder who stands to benefit from becoming the trust’s manager would be banned from voting on the resolution that would appoint them.
- Change two: more consistent protections for shareholders when a trust proposes changes to the investment manager’s fees.
- Change three: stronger board-independence requirements.
- Timeline: the consultation closes 14 August 2026, and the FCA aims to finalise the rules before the end of 2026. The Association of Investment Companies has welcomed the proposals.
A quick primer: what an investment trust is
An investment trust is a company, listed on the stock exchange, whose business is holding a portfolio of investments. When you buy an investment trust you buy shares in that company, not units in a fund. Because it is “closed-ended”, it has a fixed number of shares in issue, so buying and selling happens between investors on the market rather than by the trust creating and cancelling units.
Two features matter for this story. First, an investment trust has an independent board of directors whose job is to represent shareholders and oversee the external manager who runs the portfolio. Second, because the shares trade on the market, the share price can drift above the value of the underlying assets (a premium) or, more commonly, below it (a discount). A persistent discount is often what attracts activist investors, who buy in cheaply and then push for changes intended to close the gap, such as share buybacks, a wind-up, or a change of manager.
What triggered this: the Saba Capital campaigns
Saba Capital is a US hedge fund that, across 2024 and 2025, built significant stakes in a number of UK investment trusts trading at discounts. It then campaigned for far-reaching change, including replacing boards and, in some cases, seeking to have itself or connected parties take over as the trust’s manager. Some proposals were defeated by other shareholders; the episode as a whole put a spotlight on how a single large holder could try to reshape a trust in ways that might benefit that holder more than the wider shareholder base.
The core concern the FCA is addressing is a conflict of interest. If a large shareholder both proposes a change of manager and stands to become that manager, its interest in winning the vote is not the same as an ordinary shareholder’s interest in getting the best manager on the best terms. CP26/21 is the regulator’s attempt to close that gap in the listing rules.
What CP26/21 proposes
1. No voting on your own appointment as manager
The headline reform: a substantial shareholder who would benefit from becoming the trust’s investment manager (or from a connected party doing so) would be barred from voting on the resolution that appoints them. In other words, you cannot use your shareholding to vote yourself into the manager’s chair. The other shareholders decide. This directly targets the conflict at the heart of the Saba episode.
2. Consistent protections on manager fees
The FCA also proposes more consistent protections for shareholders when a trust proposes changing the investment manager’s fee arrangements. Fees are a perennial issue for closed-ended funds, and a change of control can come bundled with a change of fee terms. The aim is to make sure shareholders get a proper say and proper disclosure when fees are on the table.
3. Stronger board independence
Finally, the paper proposes stronger board-independence requirements. The board is the shareholders’ first line of defence, and its value depends on genuine independence from the manager and from any dominant shareholder. Reinforcing that independence is intended to make the oversight real rather than nominal.
What it means for retail investors
- Better protection from control grabs. If you hold investment trusts, often in an ISA, the main benefit is that a single large shareholder finds it harder to seize control on terms that suit them rather than you. The conflict-of-interest vote ban is the clearest example.
- More say on fees. Changes to what the manager charges would come with more consistent shareholder protections and disclosure, which matters because fees compound against your returns over time.
- A board that is actually independent. Stronger independence rules make the board more likely to act as a genuine check on both the manager and any activist, which is the whole point of the trust structure.
- Activism is not banned. None of this stops legitimate shareholder activism. A discount that reflects poor performance can still attract investors who push for change, and that pressure can be healthy. The reforms target the specific conflict of a holder appointing themselves, not activism in general.
FAQ
Do I need to do anything with my investment trusts?
No. This is a consultation on proposed rule changes, not something that requires action from shareholders. If you hold investment trusts, the effect over time should be stronger governance protections, not a change to your holdings.
Does this mean investment trusts were unsafe?
No. Investment trusts remain a long-established, mainstream vehicle. The reforms respond to a specific governance weakness that the Saba campaigns exposed: the risk of a large shareholder taking control on conflicted terms. Closing that gap strengthens an already well-used structure rather than signalling a problem with trusts themselves.
What is a discount, and why does it attract activists?
An investment trust’s shares can trade below the value of the assets it holds; that gap is called a discount. A persistent discount can attract investors who buy the shares cheaply and then push for changes (buybacks, a wind-up, or a new manager) intended to close the gap and realise a profit. That is legitimate, but it can also be the entry point for a control campaign, which is what these rules address.
When would the rules take effect?
The consultation closes on 14 August 2026, and the FCA has said it aims to finalise the rules before the end of 2026. The exact commencement will be confirmed when the final rules are published.
Has the industry backed the changes?
The Association of Investment Companies, the trade body for investment trusts, has welcomed the proposals as protecting investors. As with any consultation, the detailed responses will shape the final rules.
Savvy Investor’s take
This is a proportionate response to a real problem. The investment-trust structure works because an independent board stands between the manager and the shareholders, and because no single party can simply help themselves to control. The Saba campaigns tested that assumption and found a weak spot: a large holder proposing to become the manager and then voting its own shares to get there. Closing that specific conflict, tightening fee protections, and reinforcing board independence all strengthen the structure without dismantling the shareholder pressure that keeps trusts accountable.
For ordinary investors the message is reassuring rather than alarming. If you hold trusts for access to infrastructure, private equity, or income, these reforms make it less likely that your holding is captured on terms set by someone else. The healthy side of activism, the pressure on trusts that trade at stubborn discounts because they are poorly run, is untouched. That is the right line to draw.
Information, not advice. This article is educational information about a regulatory consultation. It is not personal financial advice. Savvy Investor Guide is not authorised or regulated by the Financial Conduct Authority. We are not financial advisers. Nothing in this article is a recommendation to buy, sell, or hold any investment trust or other security. Your financial decisions are your own; if you need personal advice, speak to an FCA-authorised financial adviser.
Key Official Sources
- FCA press release, CP26/21 (26 June 2026): FCA consults on targeted changes to the listing rules for closed-ended investment funds
- Association of Investment Companies response: AIC welcomes proposed listing-rules reforms to protect investors