Engaging to support the Great British Investment Trust

An overview of collaborative, industry-wide engagement to restore fairness in the UK investment trust sector. Investment trusts have been required to disclose costs already reflected in their share prices, resulting in double-counting and, ultimately, sell-offs.

Investment trusts have been part of Britain’s financial fabric since 1868, financing infrastructure in the UK and beyond, long before today’s regulatory landscape existed. Yet in recent years, this sector has faced significant headwinds from higher-for-longer interest rates to regulatory challenges, most notably around cost disclosure.

The issue: double-counting costs

In 2022, the Financial Conduct Authority (FCA) issued UK-specific guidance on the application of EU disclosure regimes.1 This required trusts to report ongoing fees in Key Information Documents (KIDs), under a framework designed for open-ended funds

Unlike open-ended funds, as listed companies, investment trust share prices should already reflect management and operating expenses. Adding these costs again in a KID lead, effectively, to double-counting, making them appear more expensive and less attractive.

For example, Octopus Renewables Infrastructure Trust (ORIT) and Boralex, two of our renewable energy holdings, both incur operating costs which should be reflected in their share price. However, unlike Boralex, ORIT, as a UK Investment Trust, had to present these costs separately in a KID, as shown in Figure 1, creating an unfair comparison.

Figure  SEQ Figure \* ARABIC 1: Excerpt from ORIT’s KID, dated 03-07-20252.This is misleading to retail investors. It also affects intermediaries such as Independent Financial Advisers (IFAs) and wealth managers, who then need to incorporate these costs in their own disclosures, making their portfolios look more expensive, leading to reduced allocations.

According to Baroness Bowles in 2024, the FCA’s interpretation contributed to:

• A significant drop in money invested in investment trusts, estimated at £7 billion per year.
• A material reduction in permanent equity capital allocated to UK markets.
• Foreign investors acquiring UK real assets at depressed prices3.

Our response: three phases of engagement

As long-term investors in UK infrastructure and shareholders in numerous investment trusts, we have both led and supported efforts to correct this imbalance through coordinated industry engagement and company-level engagement.

Phase 1: Mobilising a united industry voice (FY24)

In response to the FCA guidance and the subsequent position issued by Association of Investment Companies (AIC), we reached out to over 20 portfolio investment trusts who were members of the AIC, representing 48% of Foresight UK Infrastructure Income Fund (FIIF) and 17% of our Global Infrastructure Fund (GRIF). We encouraged them to join us in advocating for urgent reform by:

• Engaging directly with the AIC to request a revision of its position on disclosure requirements.
• Publicly supporting the broader industry campaign.

We also wrote to the Treasury to support excluding investment companies from the forthcoming Consumer Composite Investments (CCI) regime, the FCA’s post-Brexit replacement for the EU regulation, whose disclosure requirements had given rise to these issues, and co-signed a joint submission to the HM Treasury Consultation led by the London Stock Exchange (LSE).

Progress:

The LSE’s letter to the Treasury garnered ‘more than 300 signatories, including 119 investment companies, 33 investors, 25 brokers and 13 research firms, along with numerous MPs and other interested parties’.5 In September 2024, following strong industry lobbying, including efforts by the AIC, the FCA announced a temporary exemption for investment companies from existing cost disclosure rules, a significant win for collective advocacy.

Phase 2: Asking companies to update their KIDs (FY25)

Following the exemption, we engaged directly with the Chairs of our portfolio trusts, encouraging them to update their disclosures (e.g. Figure 1) and set costs to zero.

Progress:

Responses varied, while some trusts acted immediately, others took a more cautious approach. By the end of FY25, around 60% of engaged companies had updated their KIDs (Figure 2). The inconsistent response showed that interim measures alone were insufficient to deliver a market-wide standard.

Figure  SEQ Figure \* ARABIC 2: Interim state of cost disclosure following Phase 2 engagement (as of March 2025)6.

Phase 3: Advocating for a fair regulatory framework (ongoing)

Following Brexit, the FCA is replacing EU regulation with the new CCI regime and in late 2024, released the draft policy and consultation7,8. Disappointingly, the draft maintained the treatment of investment trusts as analogous to open-ended funds.

In response, we worked with key industry bodies such as the AIC to, once again, deliver a coordinated signal. Our consultation submission centred on three key points:

1. Investment company costs are already reflected in share prices, and additional disclosures are therefore misleading.
2. Pulling through costs from underlying holdings inflates figures and misrepresents the investor experience.
3. Any relevant expenses should be disclosed in audited financial statements, not through synthetic, standardised retail templates designed for different investment structures.

Progress:

Following what the FCA described as a 'vibrant' consultation process, the regulator confirmed it is exploring 'a solution that reflects the unique properties of investment trusts'.9

Outcomes and what’s next

Thanks to industry-wide engagement, meaningful progress has already been made. For example:

• Temporary regulatory relief achieved (Phase 1)
• 76% of FCM’s trust holdings now exclude ongoing charges in their KIDs (Phase 2)
• Regulatory dialogue is underway to achieve a permanent resolution (Phase 3)

Figure  SEQ Figure \* ARABIC 3: Current state of cost disclosures across FCM's investment trust holdings (as of November 2025).

The FCA’s final CCI policy, expected before the end of 2025, will shape how UK Investment Trusts continue to report costs. If it fails to resolve the double-counting issue in the current format, we will continue to push for regulation that ensures a fair, competitive investment landscape. We believe addressing this is critical for the long-term success of UK Investment Trusts and their contribution to the UK economy, most notably through the provision of clean energy and social infrastructure, with ‘over £17bn of assets invested in UK infrastructure including roads, trains, wind and solar farms’.10

For more information about our work engaging with investment trusts, including other sector-specific issues, such as management fee calculations, please refer to the FCM FY2025 Stewardship Report.11