Why Investment Trusts Are Going Big on Private Equity

Investment trusts offer the smartest, most democratic route into private equity in 2026—with wide discounts, rate-cut tailwinds, and a $8.6trn asset class finally opening its doors.

In my two decades covering global capital markets, I have watched retail investors be told, repeatedly and emphatically, that private equity is not for them. It is the preserve of Yale’s endowment, of Kuwaiti sovereign wealth funds, of family offices with nine-figure balance sheets and the patience of a Benedictine monk. Everyone else, so the story went, would have to make do with the public markets and whatever crumbs of innovation happened to trickle through the IPO window.

That story was always partially false. And in 2026, it is becoming demonstrably, structurally, and commercially obsolete.

The vehicle quietly dismantling this exclusivity is one of Britain’s oldest and most elegant financial inventions: the investment trust. Specifically, a cohort of listed, closed-end funds that invest in private equity—companies and strategies that never appear on a public exchange, cannot be bought on Robinhood, and have historically outperformed their listed counterparts over long investment horizons. These are investment trusts that have gone big on private equity, and the case for following them has rarely been more compelling than it is right now.

The Opportunity Set: Why Private Equity Matters More Than Ever

Let us begin with the most underappreciated fact in modern investing. The universe of publicly listed companies has been shrinking for decades. In the United States, the number of exchange-listed firms has halved since its peak in the 1990s. In Europe, the pattern is similar. Meanwhile, the private markets have exploded. According to Preqin data, global private equity assets under management stood at $8.6 trillion as of December 2024—almost ten times the figure from two decades earlier.

Think about what that means for a conventional investor. The most dynamic companies—the software champions, the healthcare innovators, the infrastructure builders of tomorrow—are increasingly choosing to remain private for longer, or forever. When HgCapital, the private equity giant behind HgCapital Trust (HGT), acquired OneStream Software in a $6.4 billion deal in January 2026, it was taking a profitable, high-growth cloud software business out of public investors’ reach, not into it. If you are not in private equity, you are simply being cut out of whole chapters of the economy.

Preqin and BlackRock’s “Private Markets in 2030” report forecasts global alternative assets reaching $32 trillion in AUM by end of the decade—a structural shift, not a cyclical blip, driven by AI infrastructure build-out, energy transition spending, and the relentless migration of ambitious companies away from the scrutiny and quarterly-earnings tyranny of public markets. Investors who are not finding ways to participate in this migration will, over the coming decade, find their portfolios increasingly anaemic.

The Investment Trust Advantage: Closed-End Structure as a Feature, Not a Bug

The mechanism by which ordinary investors can access this vast private universe—without locking up capital for a decade, without writing a million-dollar cheque to a Mayfair GP, without navigating a J-curve of zero-returns for the first five years—is the listed investment trust.

Here is why the structure matters. Open-ended funds holding illiquid private assets are inherently fragile. When markets panic and retail investors rush for the exits, fund managers of open-ended vehicles are forced to sell assets at fire-sale prices to meet redemptions. We have seen this movie before; it never ends well. The investment trust structure, because it is a closed-end vehicle whose shares trade on a stock exchange, eliminates this mismatch entirely. The manager never has to sell a portfolio company prematurely because a panicking investor in Peterborough wants their money back on a Tuesday afternoon. The underlying assets can breathe, compound, and mature on their own timescales—which is precisely how private equity is meant to work.

This structural elegance is especially powerful for the asset class. The AIC notes that over the past ten years, the average investment company has returned approximately 10% annually, but that aggregate disguises the extraordinary performance of the Private Equity sector, where the top names have generated returns that belong in a different universe.

The Numbers: A Decade of Exceptional Performance

See our guide to investment trust performance across AIC sectors.

Private equity investment trusts, as a category, have been among the best-performing assets available to retail investors over the past decade. 3i Group, the UK’s largest investment trust at £26.2 billion in net assets, has delivered a 10-year share price total return of 1,100%—an annualised gain of 26.39%. Over 20 years, 3i has returned 15.85% annualised, beating its FTSE 350 benchmark by nearly 9 percentage points. HgCapital Trust, the software-focused private equity trust managing approximately £2.5 billion in assets, has delivered 526% over 10 years at an annualised 17.75%—comfortably beating FTSE All-Share’s 7.62% annual gain by a margin of 10 percentage points.

These are not cherry-picked outliers. Morningstar’s analysis of private equity investment trusts finds the category has returned an average of 9% per year over the past decade, a figure that, while below the headline acts, still substantially outpaces most passive global equity indices on a risk-adjusted basis over comparable periods.

Performance Comparison Table: Private Equity Investment Trusts vs Benchmarks (to end-2025)

Trust / Benchmark	10-Year Annualised Return	Current Discount/Premium
3i Group (III)	~26%	Wide discount (post-correction)
HgCapital Trust (HGT)	~17.75%	~14–27% discount (volatile 2026)
HarbourVest Global PE (HVPE)	~10%+	~26–28% discount
Pantheon International (PIN)	Competitive	~27% discount
AIC PE Sector Average	~9% p.a.	Double-digit discounts prevalent
FTSE All-Share Index	~7.62%	—
Morningstar Global Markets Index	~13%	—

Sources: AIC/Morningstar; Trustnet; QuotedData. Data to early 2026. Past performance is not a guide to future returns.

2026: Why This Is the Inflection Point

I have seen plenty of “inflection points” declared prematurely in my career. I am using the phrase here with deliberate care, because the evidence from multiple credible sources is unusually convergent.

Bain & Company’s 17th annual Global Private Equity Report, published February 2026, confirmed that global buyout deal value climbed 44% to $904 billion in 2025, while exit value rose 47% to $717 billion—both figures representing the second-highest values on record, behind only 2021’s peak. The engine driving this recovery is a combination of aging dry powder ($1.3 trillion in global buyout dry powder, much of it under deployment pressure), falling interest rates across both Europe and North America, and a reopened corporate M&A market hungry for acquisitions.

Critically, Hugh MacArthur, Bain’s chairman of global PE practice, stated that “2026 is shaping up as promising—interest rates are moving south, deal pipelines are well stocked. The conditions for deal and exit activity are rosier than for some time.” Why does this matter for listed PE trusts? Because lower interest rates directly unlock exit opportunities. Higher borrowing costs made it nearly impossible for GPs to sell portfolio companies at the prices they expected, since trade buyers rely heavily on debt. As rates normalise, the logjam of unrealised assets—Bain estimates 32,000 unsold companies worth $3.8 trillion globally—begins to flow. And as exits materialise, NAVs grow, distributions increase, and discounts narrow.

The IPO pipeline is equally significant. Global IPOs rose 36% in 2025, though from a very low base. HgCapital Trust’s largest single holding, Visma—the Norwegian enterprise software giant—has been considering an IPO in 2026. The Revolut and Stripe IPOs, both imminent according to QuotedData’s analysis, could deliver significant NAV uplifts to trusts holding stakes in these companies. Each exit, realised above carrying value, is a signal that these trusts’ underlying assets are worth more than their share prices suggest—which is precisely the argument for buying them now.

The Discount Opportunity: Buying a Pound for 70 Pence

For value-conscious investors, the case for private equity investment trusts is sharpened by one of the most persistent market inefficiencies of the current cycle: wide share price discounts to net asset value.

AIC data shows that when the average investment trust discount exceeds 10%, the average trust has gone on to generate a return of 89.3% over the following five years. That compares to a 56.1% return when discounts are below 5%. We are currently in the former territory—and then some.

Trusts in the private equity sector have dominated the list of best-performing funds trading on double-digit discounts, accounting for eight of 20 featured companies in AIC analysis. Six of those were trading at discounts exceeding 30%, including NB Private Equity Partners, HarbourVest Global Private Equity, CT Private Equity Trust, and Abrdn Private Equity Opportunities. These are not distressed funds. They are well-run vehicles holding portfolios of companies that have, in the words of the AIC’s Annabel Brodie-Smith, “performed well over the long term”—and whose shares can now be acquired at a discount to the value of the underlying assets.

HarbourVest Global Private Equity’s discount narrowed from 46% in April 2025 to approximately 28% by early 2026—still wide, but directionally telling. The fund has responded to shareholder pressure (including a 5% stake acquired by activist Saba Capital) with an enhanced buyback programme, structural simplification through a separately managed account, and a continuation vote scheduled for July 2026 AGM. In 2025, HarbourVest received $424 million in distributions and repurchased $90 million of its own shares, generating a 12.5% uplift in share price from buyback activity alone. This is exactly the kind of proactive capital allocation that should attract patient investors.

Meanwhile, boards across the sector have taken heed. Record share buybacks, strategic reviews, mergers and acquisitions are all in motion as trust boards seek to close the gap between share price and asset value. As Brodie-Smith put it: “Investment trust boards are keenly focused on enhancing returns for shareholders. There have been lots of mergers and acquisitions and this is likely to continue, which will create exciting opportunities for investors.”

The Democratisation Argument: Private Equity for the Many

Here is the paradox that has long frustrated me: the asset class that most needs patient, long-term capital from individual investors is the one that has historically been most inaccessible to them.

Retail investors currently own approximately 10% of the shares in private equity investment trusts—compared with around 50% of investment trust shares in most other sectors. That gap is not a reflection of performance or suitability. It is a legacy of complexity, opacity, and the received wisdom that private equity is not for ordinary people. But those barriers are structural, not fundamental.

A pension saver in Manchester, a retail investor in Singapore, a family office in Dubai: all of them can buy shares in HgCapital Trust or Pantheon International on the London Stock Exchange for the same price per share as a Mayfair hedge fund. They can sell those shares the same day if they need to. They can invest £500 or £500 million. The minimum ticket is whatever a single share costs. That is genuinely democratic access to an asset class that is being excluded from the conventional 60/40 portfolio to everyone’s detriment.

Preqin’s 2030 outlook notes that Hamilton Lane forecasts 20% of all private market capital will be held in evergreen structures within a decade—up from around 5% today. The introduction of private market assets into US 401(k) pension plans, alongside ELTIF and LTAF structures in Europe, signals that regulators and policy-makers have finally recognised what has been obvious to close observers for years: ordinary investors are being systematically denied access to returns that institutions take for granted.

Listed investment trusts investing in private equity are, in this context, not a niche product. They are the most fully developed, most liquid, most transparent, and most regulated vehicle through which anyone can gain this exposure today.

The Structural Tailwinds: Rate Cuts, AI, and the New Deal Cycle

Three forces are converging in 2026 to make private equity investment trusts particularly timely.

First, interest rate normalisation. Central banks in the UK, eurozone, and United States have been cutting rates through 2025 and into 2026. Lower rates reduce the cost of leveraged buyout financing, increase the attractiveness of deal multiples, and make it easier for GPs to execute the exits that return capital to investors. Preqin’s 2026 outlook explicitly identifies lower interest rates as “usually beneficial to deal-making,” noting that the annualised growth rates for alternatives AUM are expected to accelerate through the cycle.

Second, the AI revolution is creating a private equity opportunity, not a threat. HgCapital has spent over two decades quietly accumulating one of the world’s largest portfolios of private business software companies—back-office automation, compliance technology, payroll, ERP. These are exactly the businesses that AI is now making dramatically more valuable, because they provide the infrastructure layer on which enterprise AI will be deployed. Hg has built $185 billion of investments across 60 privately owned software providers, and access to that portfolio, available via HgCapital Trust on the London exchange, is extraordinary.

Third, exit activity is broadening. After three years in which PE exits were concentrated at the mega-deal level, Pantheon’s managers forecast in early 2026 that the recovery would start to “trickle down” into smaller and mid-market companies—which is where the bulk of listed PE trusts’ portfolios reside. GP-led continuation vehicles grew 62% year-on-year in 2025, while secondary deal volumes rose 41%, providing alternative routes to liquidity that had been largely frozen in 2022–2024.

Risks Worth Taking Seriously

I would not be doing my job if I presented this as a one-way bet. Private equity investment trusts carry specific risks that must be understood before investing, and each deserves honest treatment.

Valuation opacity. Private companies are not marked to market daily. NAVs are typically updated quarterly and use methodologies that can lag reality in both directions. Some investors have expressed concern that portfolio valuations remain too optimistic in a world of higher discount rates. Counterargument: where exits have been executed, prices have often come in ahead of carrying values—suggesting the conservatism runs in the investor’s favour.

Discount risk. Buying at a discount is only advantageous if the discount eventually narrows. If sentiment towards the sector deteriorates further, discounts can widen before they tighten—as the painful 2022–2024 period demonstrated. The 3i Group story of 2025–2026 is instructive here: a trust that reached a 70% premium to NAV at its peak fell dramatically as concerns about its concentrated bet on European retailer Action materialised. Even the best manager cannot fully insulate a listed vehicle from sentiment cycles.

Fees. Many PE trusts operate a two-tier structure—fees at the trust level, and underlying fees charged by the GPs in which they invest. The total expense ratio can meaningfully exceed that of a passive global equity ETF. Investors need to satisfy themselves that the incremental return potential justifies the incremental cost.

Liquidity mismatch (in extremis). While the closed-end structure eliminates forced selling, it does mean that in severe market stress, bid-ask spreads can widen sharply. In a full-blown financial crisis, the shares of even well-managed PE trusts can fall dramatically, regardless of underlying portfolio performance. This is a long-term asset class for long-term investors.

See our guide to investment trust discounts for a fuller treatment of discount dynamics.

Where to Look: A Framework, Not a Stock Tip

I do not dispense individual investment recommendations. But I can offer a framework for investors considering private equity investment trusts in 2026.

For diversification and breadth: Funds-of-funds structures such as Pantheon International (PIN) or HarbourVest Global Private Equity (HVPE) offer exposure to hundreds of underlying private companies across geographies, vintages, and strategies. They are trading at significant discounts to NAV and have been actively engaging with shareholders on capital return and governance.

For concentrated sector focus: HgCapital Trust (HGT) offers a unique window into the European and North American software ecosystem, with a manager that has over 30 years of experience and a portfolio built around recurring revenue businesses with strong pricing power. Its largest investment, Visma, is considering an IPO in 2026—a potential NAV catalyst.

For thematic diversification: Oakley Capital Investments (OCI) and ICG Enterprise Trust offer concentrated but well-researched access to pan-European private businesses across a range of sectors.

In all cases, the investment should be considered as part of a diversified portfolio, given the higher-risk nature of concentrated sector exposure.

The Forward View: Patient Capital, Patient Investor

The private equity cycle is beginning to turn. The exits are starting to flow. The discounts are historically wide. The structural case for the asset class has never been stronger. And the listed investment trust—Britain’s 155-year-old financial innovation—remains the most elegant, most accessible, most liquid, and most transparent vehicle through which any investor, from any starting point, can participate in the private equity premium.

Preqin’s data points to 2025 as the probable low point of the fundraising cycle, with across-the-board increases in fund inflow activity forecast through to at least 2030. History is consistent on this point: the AIC’s 30-year data shows that discounts have always eventually narrowed, and the investment trust sector has always rebounded. The question is not whether this cycle ends. The question is whether you will have positioned yourself before it does.

The family offices already know the answer. The pension allocators are slowly learning it. It is time for sophisticated retail investors to recognise that private equity, accessed via listed investment trusts, is not the elite asset class of the few. It is the opportunity of this decade—and 2026 may be the year the door is most open.