US Solar Fund (USF) took a surprise lead last month, emerging as the investment companies sector’s top riser in May after revealing talks to sell its portfolio to an unidentified buyer.

News of the potential sale at a “significant premium” saw shares in the £113m investment trust managed by Amber Infrastructure soar 33% (see table). That put USF ahead of the technology and emerging markets and Asia trusts that continued to make big gains of 14%-27% on the back of the boom in semi conductor chip suppliers benefiting from the artificial intelligence revolution.

Overall it was a good month for UK-listed investment companies with their shares up 4.4% on average and the average discount, excluding 3i Group, narrowing to 10.6% compared to a one-year average of 12.7%, according to broker Winterflood.

Edinburgh Worldwide (EWI) stands out in our list of risers as the only trust to end May with its shares on a premium. Its 18.6% advance put the shares 4% above NAV and followed the election on 30 April of a new board proposed by Saba Capital, the US hedge fund with a 31% stake.

It also comes as the shares – in common with other Baillie Gifford trusts such as Scottish Mortgage (SMT), Scheihallion (MNTN) and Baillie Goffrd US Growth (USA) – enjoy buying interest due to their large holdings in SpaceX, the Elon Musk private company aiming for a record $1.8trn (£1.3trn) flotation this Thursday. As a result of a valuation rise by Baillie Gifford last week, EWI now holds 22% of its assets in SpaceX, the biggest proportion of its stablemates.

US Solar “really interesting”

Despite the rally in US Solar, its dollar-based shares closed the month at 36 cents, 39.5% below the net asset value of its investments in 41 operational solar projects in California, Carolina, Oregon and Utah, and well below their $1.08 peak in January 2021. That reflects investors’ caution around a fund that has struggled to sell its assets and “paused” its dividend in March to save cash, said Andrew McHattie, publisher of the Investment Trust Newsletter.

Speaking on our “In The Hot Seat” show on Friday, McHattie said while USF shareholders had been burned before, the market was pricing in just a 42.5% probability of the deal going through. He believed a transaction at a 20% discount, or around 48 cents, could be possible, which McHattie said was “really interesting” and indicated “there is still a bit of value here for optimists”.

May’s top risers

Source: Andrew McHattie 31/5/26

3i and Fidelity Asian catch the eye after falls

A mixture of Iran war shock waves, profit taking and corporate developments saw declines of 4.6% to 16.9% among last month’s 14 biggest investment company fallers.

3i Group (III), the FTSE 100 private equity giant, dropped nearly 17% after annual results showed a further slowdown at Action, the European discount retailer that accounts for three quarters of its portfolio. The launch of a £750m share buyback, its first in 21 years, did little to alleviate the downward pressure on a stock that ended the month on a 25% discount to net asset value. That represents a huge derating from its 70% premium a year ago. Following better-than-expected results from UK-focused discounter B&M (BME) last week, it’s possible the shares are starting to look cheap.

However, McHattie’s attention was drawn to Fidelity Asian Values (FAS) near the bottom of the table. Its 4.6% decline in May deepens its recent underperformance against most of its peers and suggests the fund is paying the price for fund manager Nitin Bajaj’s value style as well as his decision to underweight Taiwan, home of some leading tech stocks, while overweighting Indonesia whose stock market has fallen on economic and governance concerns. With the discount still narrow at 5%, McHattie was waiting to see if a better buying opportunity opened up, saying “if there is a style rotation it could do well”.

May’s biggest fallers

Source: Andrew McHattie 31/5/26

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