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 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 leads to effective 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 additional costs in a KID, as shown in Figure 1, creating an unfair comparison.

Figure 1: Excerpt from ORIT’s KID, dated 03-07-2025².

This is not only misleading to retail investors but also affects intermediaries such as IFAs and wealth managers, who must incorporate these costs in their own disclosures, making their portfolios look more expensive, leading to reduced allocations.

According to Baroness Bowles in a 2024 House of Lords statement, 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, Foresight Capital Management (FCM) 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, we reached out to over 20 portfolio investment trusts who were members of the Association of Investment Companies (AIC), representing 48% of Foresight UK Infrastructure Income Fund (FIIF) and 17% of our Global Infrastructure Fund (GRIF), encouraging them to join us in advocating for urgent reform⁴.

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 PRIIPs, and co-signed a joint submission led by the London Stock Exchange.

Progress:

In September 2024, following strong industry alignment, the FCA announced a temporary exemption for investment companies from existing PRIIPs 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 ongoing charges 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 2: Interim state of cost disclosure following Phase 2 engagement⁵.

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

Following Brexit, the FCA is replacing PRIIPs with the new CCI regime and in late 2024, released the draft policy and consultation⁶. 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.”⁷

Outcomes and what’s next

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

• Temporary regulatory relief achieved (Phase 1)
• 76% of FCM’s trust holdings now excluding ongoing charges (Phase 2)
• Regulatory dialogue underway (Phase 3)

Figure 3: Current state of cost disclosures across FCM's investment trust holdings.

The FCA’s final CCI policy, expected by the end of 2025, will likely determine the outcome and be the measure of success. If it falls short however, we will continue to advocate for regulation that promotes a fair, competitive investment landscape.

Beyond cost disclosures, we are also engaging across our trust holding to address other sector-specific issues, such as management fee calculation. For more, see our latest Stewardship Report⁸.