Debt trusts buck dire issuance trends in 2025

London-listed debt funds represent a rare bright spot in 2025's issuance slowdown, accounting for 39% of fundraising despite making up less than 2% of the investment trust universe.

Investment trusts focused on debt have defied the broader industry’s issuance slowdown so far this year, according to data from broker Winterflood. 

Monthly analysis for July placed overall fundraising across sectors at just £70m – a 34% drop from June, and a 67% fall year on year. Debt funds, however, were an outlier, accounting for 55% of the total raised. 

Year to date, equity trusts have made up 61% of all fundraising activity, with the remaining 39% attributable to the debt sector. 

The broker pointed out this is despite debt trusts representing less than 2% of net assets across London’s closed-end fund universe. By contrast, in 2024, listed equity funds accounted for 75% of all fundraising, while the bonds, debt and leasing sector tracked by Winterflood contributed just 11%. 

The report also highlighted persistent sector-wide discounts, which have rung many trusts dry with money spent on buybacks. Once again, debt was the exception: the average share price across Winterflood’s ‘Debt: Loans & Bonds’ category stood at a 2% premium at the end of July versus a 13.2% mean discount across the universe as a whole. 

M&G leads charge

The vast majority of the £176.8m raised in the Specialist: Bonds/Debt/Leasing category this year comes from smaller secondary issuances — incremental share issues by existing funds to meet investor demand.

Turning to specific issuances, the biggest single contributor to debt fund issuance this year has been M&G Credit Income (MGCI ). The £177m trust, which as of yesterday trades at a 1.5% premium, invests in a mix of public and private investment grade debt instruments. In March, the M&G trust raised £6.3m via a placing that was open to retail investors. 

The other notable issuance came from EJF Investments (EJFI ), which raised just under £6m while rolling over and placing zero-dividend preference shares, a form of borrowing for trusts.

Rates remain elevated

Across the investment trust debt sector, 16 out of the 24 funds delivered positive returns in July and the median total return was 0.9%, ahead of the 0.4% rise for the Bloomberg Barclays Global High Yield Index.

Winterflood put generally healthy returns across the sector down to ‘market interest rates remaining elevated’.

The report reference the Federal Reserve’s decision during the month to keep US interest rates unchanged, as well as European Central Bank president Christine Lagarde noting the central bank is in a ‘wait-and-watch’ situation. 

The broker added: ‘In this context, 10Y Treasury yields increased by +15 [basis points] to 4.37% over July, 10Y Gilt yields rose by +8bps to 4.57%, and 10Y Bund yields rose by +9bps to 2.70%.

‘Most debt asset class returns were positive across major markets over the month, with Sovereign Debt the exception, while High Yield and Leveraged Loans were top performers,’ said Winterflood’s investment trust research team, which is led by Emma Bird.