5 investment trusts to watch for 2025

Investing in innovative small and medium-sized companies from developed markets

Many investors often focus on larger, more established companies. That’s not a bad thing as there are lots of successful big businesses out there. But for a portfolio with room for something different and higher risk, global smaller companies could be a consideration.

Smaller companies are often more innovative than their larger counterparts and can offer new products or services to excite customers. If the business gets it right, the growth potential can be huge, but the risk of failure is also higher.

Smithson Investment Trust invests in small and medium-sized companies from across the globe, and focuses on developed markets like the US, Europe, and the UK.

Almost half the trust is invested in US companies that are much less common than the big, global names we’re used to.

Across the pond, a new president entering the White House in January will bring about a change in policy.

One of the most talked-about is increasing tariffs, particularly in relation to China. Tariffs aren’t usually good for growth overall. But they could potentially be good for US smaller companies as trade tariffs favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused.

Combine this with a more supportive monetary policy stance and that could make this year an interesting one for domestic-facing US corporates.

This trust has been managed by Simon Barnard since its launch in October 2018, alongside assistant portfolio manager Will Morgan.

They invest in high-quality companies they believe can dominate within their market niche. Long-term sustainable growth is key, so they aim to avoid companies with lots of debt.

The trust usually invests in 25-40 companies. This is a high-conviction approach which means each investment can have a significant impact on performance, both positive and negative, which increases risk.

Investing in large and higher-risk small companies from a range of emerging economies

Emerging markets cover a diverse mix of countries. From big Asian countries like China and India, to Brazil and Mexico in South America, these countries offer a lot of potential as part of a portfolio looking for long-term growth opportunities. But they’re all at different stages of development and have different drivers of growth.

It could take time for these markets to develop meaningfully, so the risks are greater, and investors should expect more ups and downs – a longer investment outlook is essential here.

Some markets, like India, have seen noticeable growth in the last few years. This means the share prices of some Indian companies no longer offer as much value as before. That’s why investing with an experienced fund manager can be a good idea as they have the expertise to look for companies they believe still have growth potential.

Other markets, like China, have benefitted from government intervention. The stimulus in China in the second half of 2024 saw the market rise, although whether this effect is long term remains to be seen. Either way, bouts of volatility should be expected.

The JPMorgan Emerging Markets Investment Trust aims to deliver long-term growth through investing in both large and higher-risk small companies from a diverse range of emerging economies, including India, China, Taiwan, and South Africa.

The trust’s managers have lots of investing experience between them, with lead manager Austin Forey running this trust for three decades.

They’re supported by a large specialist analyst team who conduct thousands of meetings with invested companies every year. They look for high-quality companies with long-term growth prospects that they aim to hold for a long time.

Aiming for moderate long-term growth while protecting assets during potential downturns

Run by Sebastian Lyon and Charlotte Yonge at Troy Asset Management, Personal Assets Trust is a multi-asset investment trust that aims to preserve capital. That is, not lose money when the market takes a downturn and focus on moderate long-term growth for investors.

Coming into a year where the global economy could remain challenged and markets volatile, this trust could be a more conservative option, but still with some growth potential. Though like any investment, it can still fall in value.

The trust is focused around four 'pillars'.

The first contains large, established companies Lyon and Yonge think can grow sustainably over the long run and endure tough economic conditions.

The second pillar is made from bonds, including US index-linked bonds, which could shelter investors if inflation rises, and traditional UK government bonds (gilts).

The third pillar consists of gold-related investments, including physical gold, which has often acted as a ‘safe haven’ during times of uncertainty.

The final pillar is ‘cash’. This helps provide important shelter when markets stumble, but also a chance to invest in other assets quickly when opportunities arise.

The managers have tended to focus on companies based in developed markets, like the US and UK. This includes some of the world's best-known companies with highly recognisable brands.

The managers have the flexibility to invest in smaller companies and use derivatives, which, if used, adds risk. The trust is also concentrated, which means each investment can contribute significantly to overall returns, but it can increase risk.

Stability and preservation of wealth while investing in funds and trusts

The managers of Capital Gearing Trust take a similar approach to the managers at Troy Asset Management, with a focus on preserving wealth in weaker markets.

This makes the trust an interesting choice for a more conservative portfolio.

It could provide diversification alongside other multi-asset trusts, or be used to provide some stability alongside more adventurous trusts or investments – though it can still fall in value.

The trust is constructed around three ‘buckets’ of assets – dry powder, risk assets and index-linked bonds.

The dry powder bucket is made up of cash, treasury bills (US government bonds) and short-dated bonds. The purpose of this section is to hold its value during volatile times or when shares and bonds are going down in price.

The risk assets section is mainly invested in company shares. This is where the trust offers differentiation from many others. Instead of investing in shares directly, the managers mainly invest in other trusts or funds. This gives them access to some specialist investments and means they can invest in other trusts that might be trading at a discount.

If those discounts closed, this should add value to the Capital Gearing Trust. This section of the trust aims to provide long-term growth.

Index-linked bonds are the third bucket, and the managers usually invest in US Treasury Inflation Protected Securities (TIPS) or UK Index-Linked Gilts. This could provide some inflation shelter and for the trust to hold up better when markets are under stress.

The trust has a longstanding investor at its helm in Peter Spiller, who has run the trust since 1982 using broadly the same investment philosophy throughout. There are also two co-managers on this trust.

Investing in onshore and offshore income-producing UK wind farms

The new Labour government is seemingly taking plans to move away from oil and gas and build a cleaner power system more seriously, which could present interesting opportunities for investors.

The government aims to achieve its goal of fully decarbonising electricity by 2030, and wind energy is key to the country’s net-zero commitments.

In July, the Climate Change Committee estimated that by 2030 the number of onshore and offshore wind installations would need to double and triple, respectively.

On her first day as chancellor, Rachel Reeves removed the de facto ban on onshore wind farms and has simplified planning rules to pave the way for new wind projects in the UK.

The UK has pockets of land that are ideally suited to generating renewable energy, and removing complex planning rules could boost UK renewables and infrastructure.

While the government has so far made the right noises, remember nothing is certain and policies have the potential to change over time.

Greencoat UK Wind is one way to get exposure to this specialist area of the market.

It invests solely in operating onshore and offshore UK wind farms that are currently producing income.

It aims to pay investors with a sustainable annual dividend that increases in line with inflation as measured by RPI (Retail Price Index), while preserving the value of an investment. This means the majority of any returns will come in the form of income rather than capital growth.

The trust is managed by and an experienced team from Schroders Greencoat, a renewable investment manager.

However, investors should remember that investing in a single sector like wind farms or renewable infrastructure is a higher-risk approach compared to a more diversified one. We think investment trusts investing in a specific sector should usually only form a small part of a well-diversified investment portfolio.