Financial advisers give their ISA recommendations for young, middle-aged and retired investors

The end of the tax year is approaching, and investors should ensure they use their £20,000 tax-free ISA allowance before the deadline on 5 April.

Investment trusts can deliver strong long-term performance, with the average trust returning £2,748 for every £1,000 invested over the past ten years.¹ But with over 300 investment trusts on offer, how do investors choose the right fund for this year?

To provide investors with some ideas, the Association of Investment Companies (AIC) asked independent financial advisers and wealth managers for their favourite trusts for specific age groups: from young savers to the middle-aged and then retired investors.

Annabel Brodie-Smith, Communications Director at the Association of Investment Companies (AIC), said: “Our appetite for risk and need for income versus capital growth changes as we get older, so the most appropriate type of investment trust also changes. Given the depth of choice on the market, it can be really helpful to get some guidance about which trusts you might consider. Always do your own research, and if in doubt, consult a financial adviser who will take your personal circumstances into account.” 

Younger investors

Tom Poynton, Executive Director of Baron & Grant, said: “Younger investors have time on their side, allowing them to take on higher-risk investments with strong growth potential. Investment trusts focusing on sectors such as technology, healthcare, emerging markets and smaller companies may appeal to this group, as they offer the opportunity for long-term capital appreciation. Reinvesting any dividends and compounding returns is particularly effective at this stage. 

“My recommendation is the Scottish Oriental Smaller Companies Trust whichrecently ranked in the top ten of the ISA millionaires investment trust list and trades at a double-digit discount. The trust invests in Asian smaller companies and boasts an impressive long-term performance record. The management has recently shifted to a higher conviction portfolio. A recent five-to-one share split should also aid liquidity and accessibility.”

Philippa Maffioli, Director at Blyth-Richmond Investment Managers, opted for F&C Investment Trust. She said: “F&C is the world's oldest investment trust with demonstrable stability and a well diversified international strategy. Managed by Paul Niven, who has extensive experience in global markets, this trust is a solid foundation for any long-term portfolio. It offers a yield of 1.3%, prioritising long-term capital growth and income growth. It invests in the world's major stock markets, focusing on shares of established companies while also seeking out promising newcomers. Furthermore, it exposes investors to a range of well managed private equity funds.”

Maffioli also recommended Monks Investment Trust. She said: “Monks is a globally diversified trust with a strong leaning to technology, including top holdings in Amazon and Microsoft.”

Genevra Banszky von Ambroz, Partner, Investment Management at Evelyn Partners, said: “For younger investors I would consider really well managed trusts which take a little more risk for potentially greater returns. Ashoka India Equity and Ashoka WhiteOak Emerging Markets are top of my list.

“Ashoka WhiteOak Emerging Markets is still small with a market cap of £40 million, but it has managed to grow from £30 million despite challenging market conditions since it listed on the stock market, which is testament to its quality. Shareholders benefit from a 0% annual management fee, with the managers paid a capped performance fee in shares if they outperform over a three-year period. It also offers an annual tender opportunity at net asset value (NAV) less costs, which helps to keep the discount tight because investors have an opportunity to exit at close to NAV.”

Paul Chilver, Director and Financial Planning Manager at Birkett Long IFA, said: “I like Oakley Capital Investments in the private equity sector. This trust has excellent medium to long-term performance although it has struggled in recent months. It currently trades at a potentially attractive discount of over 30%. Then I like the Templeton Emerging Markets Investment Trust. Despite some excellent performance in the short to medium term the trust is still trading at a double-digit discount due to emerging markets being generally out of favour.”

Saftar Sarwar, Chief Investment Officer at Binary Capital, said: “For younger investors it is difficult to argue against Scottish Mortgage Investment Trust as a long-term buy and hold investment. It holds genuine global innovative investments, with many likely to be long-term winners in their respective areas of technology, healthcare and biotechnology. In addition, it has a large allocation to private companies, an area of the market that can be difficult for many investors to access. SpaceX is a large holding, for example. It also has a competitive fee. The trust has been buying back shares so the discount has come down to single digits, and is expected to improve further in the coming months.”

Middle-aged investors

Paul Chilver, Director and Financial Planning Manager at Birkett Long IFA, said: “My first suggestion for a middle-aged investor is the Mercantile Investment Trust which is a UK-focused trust that has been managed by Guy Anderson at JPMorgan for many years. It aims for long-term capital growth in a mixture of UK medium and smaller companies which have been out of favour. Assuming the outlook improves, this trust will be well positioned to take advantage. My other suggestion is Fidelity European Trust which has a longstanding track record of steady growth. The managers generally look for larger companies and long-term dividend growth.”

Tom Poynton, Executive Director of Baron & Grant, said: “Balancing risk and reward is key for those in their forties and fifties. While growth is still important, there is a greater focus on wealth preservation and diversification. Investors in this stage may also consider trusts offering a steady income stream as they approach retirement.

“It is difficult to look past JPMorgan Global Growth & Income for this cohort. The trust invests globally, with a well resourced ‘best ideas’ approach, and has a dividend policy which targets an annual payment of at least 4% – paid quarterly. The trust has also been the rollover vehicle of choice for a number of smaller market-cap global equity trusts, given the drive for consolidation in the sector, resulting in a large, liquid and low-cost investment.”

Philippa Maffioli, Director at Blyth-Richmond Investment Managers, said: “Alliance Witan has a dividend yield of 2.2% and is an excellent bedrock holding with an emphasis on long-term returns. The multi-manager approach ensures broad exposure across companies, sectors and global markets. The 11 managers choose no more than 20 stocks each and the portfolio aims to consistently outperform global stock markets, smooth out highs and lows and keep risk under control. The trust is committed to increasing dividends annually and can boast 58 years of rising dividends, making it an AIC dividend hero. I also like Murray International. With a dividend yield of 4.4%, this trust is ideal for those looking to increase dividend accrual while maintaining capital growth.”

Genevra Banszky von Ambroz, Partner, Investment Management at Evelyn Partners, said: “Generally, middle-aged investors will still have a long-term horizon, but a slightly lower appetite for risk. JPMorgan Global Growth & Income yields 4.3% and owns the most attractive growth opportunities in the world, as identified by JPMorgan’s 80-strong analyst team. Those seeking something with more of an alternative bent might consider Cordiant Digital Infrastructure, which trades on a discount of 30% and yields 4.6%. This is a portfolio of private digital infrastructure assets, managed by an extremely experienced team. Those who look for shared commitment from the management teams should look no further; executive chairman Steven Marshall has been a meaningful buyer of the shares over the past couple of years so he clearly believes in the strategy.”

Retired investors

Saftar Sarwar, Chief Investment Officer at Binary Capital, said: “For retired investors wishing to avoid volatility and to preserve their capital, Personal Assets Trust managed by the team at Troy Asset Management is a compelling investment. The trust aims to protect its shareholders against inflation and market risk, and has consistently delivered steady returns in pretty much all investment and economic scenarios.”

Paul Chilver, Director and Financial Planning Manager at Birkett Long IFA, said: “On the assumption that a retired investor will be looking for income, I am suggesting a couple of trusts which should complement each other. First is Edinburgh Investment Trust which has shown excellent performance since a change of manager whilst trading at a potentially attractive discount. The trust will have a bias to UK large-cap stocks, and I feel that this will sit nicely with my second suggestion, STS Global Income & Growth Trust. Although this doesn’t pay as high a dividend as Edinburgh, it does look to provide some protection to the capital which may be attractive for retired investors. It is well diversified globally and has a discount control mechanism which should keep the discount tight.”

Tom Poynton, Executive Director of Baron & Grant, said: “Retired investors often prioritise capital preservation and a reliable income stream over high-risk growth. Investment trusts with strong dividend yields, exposure to defensive sectors, and lower volatility assets like infrastructure, bonds or real estate can be ideal. Inflation protection is also key, ensuring purchasing power is maintained over time. Liquidity and consistent returns become more important, making income-focused and well diversified trusts a suitable choice.

“Merchants Trust is my pick for retired investors. Established in 1889, the trust aims to deliver a high, progressively growing income stream and capital growth by investing mainly in high-yielding large UK companies. It is an AIC dividend hero boasting a 42-year record of consecutive dividend increases. The trust currently yields 5.4% and can be purchased at a 5% discount, which is compelling.”

Genevra Banszky von Ambroz, Partner, Investment Management at Evelyn Partners, said: “It’s quite difficult to make generalisations but it is likely that most retired investors will have a lower appetite for risk and a preference for income. Sequoia Economic Infrastructure Income is a diversified portfolio of economic infrastructure bonds and loans which trades on a 17% discount to NAV and yields close to 9%. The team has a very good track record of delivering returns for their investors and it offers an attractive opportunity to diversify fixed interest exposure. In addition, Pantheon Infrastructure trades at a 19% discount and yields 4.5%, which fails to recognise the quality of the portfolio and its performance despite the challenging backdrop. Sustainability considerations are fully integrated into the investment processes of both trusts, which may add to the appeal.”  

Philippa Maffioli, Director at Blyth-Richmond Investment Managers, said: “Merchants Trust offers a conservative management style and focuses on blue chip UK stocks. The result is stability and consistent dividends. Fund manager Simon Gergel believes the UK market's valuation is well below long-term averages at a time when many other markets are highly rated, making it a perfect time to invest in British blue chips.

“I also like HICL Infrastructure trust which invests in the transport, healthcare and energy sectors. It offers a yield of 7.5% and invests in core infrastructure assets that provide stable cash flows. It has a portfolio of over 100 assets and focuses on holdings with strong social foundations, such as healthcare and education. High interest rates have challenged infrastructure funds, but we expect to see them become increasingly attractive as rates gently come down.”

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Notes to editors

1. Source: theaic.co.uk / Morningstar (to 28/02/25). Average investment trust excluding VCTs.
2. The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 308 members and the industry has total assets of approximately £274 billion.
3. For more information about the AIC and investment trusts, visit the AIC’s website.
4. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.