February Investment trust sector newsletter
BlackRock’s £780m bet on scale
BlackRock Throgmorton and BlackRock Smaller Companies Trust (BRSC) are merging into a single £780m vehicle largely focused on UK small- and mid-cap ‘quality growth’ companies. Throgmorton will be wound up into BRSC, and shareholders will have a capped cash exit opportunity alongside rolling into the enlarged trust. The deal features a tiered management fee reaching as low as 0.45% and – crucially – has secured the support of Saba Capital, removing a meaningful activist overhang.
The commercial logic is straightforward: greater scale, better liquidity and lower costs. It is also part of a broader trend. With discounts stubbornly wide across the sector, boards are increasingly concluding that two overlapping trusts are worth less than one larger, more efficient vehicle. Expect more of these conversations behind closed doors.
Saba returns for round three
Fresh from a decisive defeat at Edinburgh Worldwide Investment Trust’s January general meeting (where 92.7% of independent shareholders backed the incumbent board), Saba Capital is trying again. The activist has requisitioned a third vote ahead of the April 2026 AGM, banking on lower turnout to improve its chances and sweetening the offer with a pledge of a 100% cash exit at 99% of NAV.
The trust’s near-term picture has been shaped by its SpaceX exposure. December’s revaluation lifted the position to around 16% of assets and pushed the share price to a premium, which was notable for a trust that has otherwise traded at a discount for much of the post-2022 period. Saba argues any premium is temporary and is critical of the Baillie Gifford-managed trust’s longer-term outcomes and governance.
The board rejects Saba’s case. We believe shareholders made their position clear during the two previous votes, and we struggle to understand the rationale for a third. Edison published a note on EWI ahead of the January vote; the investment case remains unchanged.
AI disruption: Separating signal from noise
HgCapital Trust (HgT) was caught up in a broader sell-off in listed software companies in February, amplified by Anthropic’s release of an autonomous legal and compliance tool, which fanned AI disruption fears across the software space. At its trough, the trust hit its lowest price since 2023. The recovery has initially been equally sharp, with a 19.3% rebound supported by buybacks and significant dip-buying from Jupiter Fund Management, Valhalla Ventures and all of HgT’s non-executive directors. That said, the discount has widened again in recent days to around 29%.
Edison’s recent note SaaS is not dead identifies two distinct risks worth distinguishing. The first is outright AI substitution of the software provided by HgT’s portfolio companies; here, we are relatively sanguine. HgT’s portfolio companies are deeply embedded, mission-critical providers serving European SMEs that prioritise accuracy, auditability and regulatory compliance, characteristics that make wholesale AI substitution a distant prospect. The second, and more nuanced, risk is the proliferation of agentic AI solutions offered by third-party providers that sit on top of the base software layer. In order to succeed, HgT’s portfolio companies have to successfully build innovative AI-driven ‘products of action’ on top of the base layer and wrap them into appropriate controls (structured outputs, rules, verification, human-in-the-loop setups and audit logs). Otherwise, challengers will offer such solutions on top of the base software offered by the traditional SaaS provider. Hg has seen some initial promising progress in this respect, as illustrated by over 700 live generative AI projects across its portfolio, which are expected to generate approximately $130m of incremental EBITDA this year, up from $40m in 2024.
Molten Ventures also staged a recovery, rallying 4.1% to 498p while conducting share buybacks of its own. Our note Strength through diversification highlights the breadth of Molten’s portfolio across hardware and deeptech, consumer technology and digital health alongside enterprise software, with several holdings protected by proprietary data moats or deeply embedded operating infrastructure. Many of its largest holdings, including Ledger, ICEYE and Isar Aerospace, face limited disruption risk from AI. Its discount has already narrowed from 47% to 34% over the past year.
Private equity: The thaw continues
The global private equity (PE) environment continues to improve. Buyout deal value rose 44% to $904bn in 2025, driven by monetary easing, a $1.3tn dry powder base and a strong pick-up in megadeals. Exit activity was similarly robust, with global exit value up 47% year-on-year to $717bn. In Europe, PE deal value reached an all-time high of €645bn, while average holding periods declined for the first time since 2020.
Limited partner appetite remains strong, with over 80% expecting to maintain or increase PE allocations over the next 12 months. The direction of travel is clearly positive, though distributions as a percentage of NAV remain below long-term averages. Pressure on general partners to return capital will persist through 2026.
For a ground-level perspective on what this environment means in practice, Edison’s Milosz Papst recently sat down with Alan Gauld, senior investment director at Patria and lead portfolio manager of Patria Private Equity Trust (PPET). Alan covers the highlights of PPET’s FY25 results, shares his outlook for 2026 in light of improving European PE activity and discusses several notable recent exits and PPET’s prospective capital allocation. The interview is available to watch on Edison TV and YouTube.
On the road
The BlackRock Latin American Trust webinar took place last week – if you missed it, you can watch it on our website.
Coming up: the BB Biotech roadshow is visiting Dublin (4 March) and London (5 March). Matador Secondary Private Equity follows later in the month, with stops in Dublin (24 March) and Monaco (27 March). Rockwood Strategic hosts a webinar on 14 April, while HBM Healthcare visits Dublin on 28–29 April.
Two key industry dates for the diary: the Edison Growth Conference on 12 May, followed by the AIC Dinner on 14 May.
