After three years of widening discounts, the investment trust sector may finally be seeing the fruits of a rapid increase in corporate actions, with valuation gaps narrowing almost across the board in the first half of the year.

According to analysis by broker Stifel, the average trust discount ended the first half of 2025 (H1) at 14% — marginally lower than where it began the year at close to 15%, despite briefly ballooning to 20% as tariffs rattled global markets in April.

‘This is only a small improvement, though still welcome after three consecutive years of discounts widening and, looking through the tariff-induced volatility, the sector saw a solid 5% total return,’ said sector analyst William Crighton.

Examining regions and themes in its first half review for investment companies, on the listed equities side Europe stood out, having overtaken US tech as the best-performing market. Japan trusts also saw share price discounts to net asset value (NAV) narrow as investors recognised improving performance in the region.

‘In the alternatives space, whisper it quietly, but the renewables and infrastructure sectors saw discounts narrow...over the half thanks to a strong second quarter,’ said Crighton. 

Discounts in the renewables and infrastructure sectors – which had suffered from some of the most extreme low valuations – narrowed by an average of nine and five percentage points, respectively, over the latest quarter, according to Stifel. 

By contrast, discounts in the private equity sector edged wider over the period.

Of the five Europe trusts that made the top risers list, JPMorgan European Discovery (JEDT ) led the charge. The small cap specialist prolonged its decade-run of outperformance, delivering a 22% NAV total return and 27% shareholder total return, including dividends reinvested.

In NAV terms BlackRock Latin American (BRLA ) – where manager Sam Vecht was recently interviewed by Citywire – was the best performer, with the underlying portfolio up 29% and the same return seen by shareholders.

Other standouts included battery storage funds Gresham House Energy Storage (GRID ), soaring 71%, and Gore Street Energy Storage (GSF ), which came in third with a 44% rise for shareholders. 

Sandwiched between them, Seraphim Space (SSIT ) delivered an impressive 57% gain, benefitting from increased government spending on defence and aerospace technologies. 

Elsewhere, Downing Renewables & Infrastructure (DORE ) rose 36% following a takeover bid by Bagnall Energy, while Schroder Capital Global Innovation (INOV ) returned 39%, supported by a successful first portfolio realisation as the trust begins the process of winding down. 

Among the fallers, healthcare and biotech trusts were dragged down by a wave of negative headlines, from worries over US Food and Drug Administration (FDA) funding cuts, to political noise around Robert F. Kennedy Jr. and Donald Trump.

Biotech Growth (Biotech ), whose investors saw a 16% loss, assured shareholders in results this month that the macro disturbance belied strong fundamentals, framing its large discount as ‘an excellent buying opportunity.’

Interestingly for a period in which the US president has been rallying behind domestic manufacturing, US small caps also struggled. JPMorgan US Smaller Companies (JUSC ), with a heavy overweight to industrials, was the biggest faller, down 19% over the first half after a big run-up for small American stocks in the final quarter of last year. 

After a return to form in 2024, Baillie Gifford’s growth-oriented trusts – Schiehallion (MNTN ), Baillie Gifford US Growth (USA ) and Edinburgh Worldwide (EWI ) – also took a collective hit.