Best London Stock Exchange Investment Trusts to Watch in 2026

Investment trusts traded on the London Stock Exchange remain one of the most tax-efficient and flexible ways for UK investors to access professionally managed, diversified portfolios with the potential for long-term capital growth and income. Below are two compelling options that stand out for 2026, combining strong track records, attractive valuations, and well-positioned strategies in the current market environment.

1. Pershing Square Holdings (LSE: PSH) – Contrarian High-Conviction Investing Led by Bill Ackman

Pershing Square Holdings is a unique FTSE 100 constituent that gives investors direct access to the concentrated, activist-style portfolio run by renowned billionaire investor Bill Ackman through his New York-based hedge fund.

Key Investment Approach

Ackman focuses on a small number (typically 8–12) of very high-quality, large-cap businesses that he believes are temporarily mispriced due to short-term fears, headline risks, or market overreactions. This “buying fear in great companies” philosophy has produced market-beating returns over multiple time horizons.

Notable Recent Successes

• Alphabet (Google) – Significant position built in early 2023 amid widespread concerns about ChatGPT disrupting search; shares have more than tripled since then.
• Uber – Large stake added at the start of 2025 when robotaxi fears weighed heavily on the stock; strong recovery followed.
• Chipotle Mexican Grill (2016 example) – Classic case of buying after food-safety scares, delivering substantial long-term gains.
• Recent additions include Amazon and Brookfield, both seen as durable compounders trading at historically attractive levels.

Performance Snapshot

• Share price approximately doubled over the past five years.
• Up roughly 20–26% in 2025 alone (depending on exact measurement date).
• Long-term outperformance versus the S&P 500 in most periods, despite higher volatility due to concentration.

Current Opportunity

As of late December 2025, PSH continues to trade at a significant discount to its net asset value (NAV), often in the 25–35% range historically, with periodic share buybacks helping to narrow the gap over time. Ackman has publicly stated that the team is sitting on substantial cash reserves (approaching 15% at times) and actively hunting for new high-quality opportunities, particularly among software, technology, and consumer-facing businesses currently out of favour due to AI-related uncertainty.

Risk Considerations

The concentrated portfolio means that poor performance in just one or two holdings can significantly impact returns. However, the focus on fundamentally strong businesses with powerful competitive advantages provides a strong risk/reward asymmetry for patient, long-term investors.

2. Baillie Gifford UK Growth Trust (LSE: BGUK) – High-Quality UK Growth at a Discount

Baillie Gifford UK Growth Trust invests in a concentrated selection of the highest-quality UK-listed growth companies, many of which are currently trading at depressed valuations relative to their long-term earnings power and competitive positions.

Portfolio Highlights

• Top performer in 2025: Games Workshop has been a major driver of recent returns.
• Undervalued quality names with rebound potential: Experian (global credit data leader), RELX (information and analytics powerhouse), Rightmove (dominant UK property portal), and Auto Trader (leading digital automotive marketplace) have all lagged the broader market in 2025, largely due to investor concerns over AI disruption. Many analysts believe these fears are overblown given the entrenched data moats and recurring revenue models.
• Value-oriented holdings: Diageo (premium spirits leader) and Wise (disruptive cross-border payments platform) now appear significantly undervalued on forward earnings and cash flow metrics.

Recent Performance

In the six months to 31 October 2025, the trust delivered a net asset value total return of 17.7%, outperforming the FTSE All-Share Index (16%). This demonstrates the portfolio’s ability to capture upside when quality growth names regain favour.

Valuation & Income Appeal

• Trades at a persistent discount to NAV (recently around 9–10%).
• Offers a forward dividend yield of approximately 2.75%.
• Low overall portfolio valuation provides a margin of safety and significant upside potential if investor sentiment rotates back toward quality UK growth stocks in 2026.

Risk Considerations

Continued market preference for value or cyclical stocks, or prolonged AI-related uncertainty, could keep some holdings out of favour in the near term. However, the combination of attractive discounts, strong underlying business models, and potential for style rotation makes BGUK an intriguing option for investors seeking UK-specific exposure.

Final Thoughts

Both Pershing Square Holdings (PSH) and Baillie Gifford UK Growth Trust (BGUK) offer active, high-conviction strategies on the London Stock Exchange with structurally attractive valuations as we head into 2026. PSH suits investors comfortable with global large-cap concentration and contrarian positioning, while BGUK appeals to those seeking undervalued UK quality growth with an income component.

As always, investment trusts can trade at discounts or premiums to NAV, and capital values can fall as well as rise. Conduct your own research, consider your risk tolerance and investment horizon, and remember that past performance is not a reliable indicator of future results.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.