UK investment trusts, which have a long history of investing in illiquid assets while presenting them as liquid, are facing renewed scrutiny amid campaigns led by hedge fund manager Boaz Weinstein. His fund, Saba Capital, recently urged Gore Street Energy Storage Fund—a trust focused on grid battery investments—to liquidate in order to close a roughly 35 percent discount to its net asset value. Gore Street has resisted, arguing that selling assets under current market conditions would fail to realize their full value. This stance is similar to that of Workspace, a London property fund previously targeted by Saba Capital, which also declined to liquidate.

Investment trusts often trade at significant discounts to their net asset values, a common phenomenon particularly evident among renewable energy infrastructure trusts listed in the UK. These 15 trusts currently trade at an average discount of around 23 percent. The reasons behind such discounts are debated. One argument is that the valuations reported in the trusts’ financial statements may be inflated, but this alone does not always justify calls for liquidation. If the market price accurately reflects the underlying asset values, then forcibly selling the assets would not necessarily yield better returns for investors.

Another perspective suggests that discounts may stem from concerns about asset management, including fears that managers might be compelled to sell assets below their book values or are not effectively overseeing the portfolio. Proponents of this view argue that replacing management teams could potentially eliminate discounts without the need to wind up the trusts. However, there is also the possibility that these discounts are a persistent feature of investment trusts, arising from market habits rather than fundamental valuation issues.

For investors focused on income, specifically those attracted by dividends, these discounts may carry less significance. Some trust managers, such as those at Gore Street, remain optimistic about future improvements in their sectors—in this case, energy storage markets. Nonetheless, this outlook reinforces a key challenge: while the trusts offer liquidity to investors through tradable shares, selling in the short term often comes at a steep cost due to asset illiquidity. Full value realization may require patience, underscoring the classic tension between illiquid underlying assets and the expectation of liquidity in listed trusts.

The ongoing debates and activist campaigns highlight the complexities involved in the valuation and management of UK investment trusts. They point to the broader issue in modern finance of presenting illiquid assets as readily tradable, a practice dating back over a century but still generating controversy today. Despite pressures, for many of these trusts, the path forward may involve balancing investor expectations, market perceptions, and long-term asset performance rather than resorting to liquidation.