By Ross Dow, Director, Debt Finance, OakNorth 

Ask an investment trust board why they want a revolving credit facility (RCF) and you’ll hear the same words every time: flexibility, liquidity headroom, optionality. All valid. But that’s not the whole story. 

What you rarely hear, even from trusts that are actively running buyback programmes, is the word “buyback” itself. It’s there in the background. It’s often happening in practice. But it isn’t the frame through which most trusts think about their facility when they first approach a lender, and it’s rarely how a lender pitches back. 

I find that interesting, because the numbers in this sector make the conversation hard to ignore. 

A sector returning capital at scale 

In the first half of 2026 alone, UK investment trusts bought back £4.1 billion of shares. That follows a record £10.22 billion in buybacks across 2025, a 36% increase on the year before. For a sector managing roughly £265 billion in assets, that is a meaningful proportion of capital being actively returned to shareholders, and it shows no signs of reversing. 

The motivation is clear. Average discounts across the sector stood at 12.3% at the start of 2026, narrowing to 11.6% by mid-year, briefly falling into single digits in May for the first time since 2022. Progress, but still a discount. For trusts sitting materially wider than that average, the pressure from shareholders and, in some cases, activists, to demonstrate capital discipline is significant. 

Buybacks are the most direct tool available. And yet the way most trusts are financing them, drawing on cash, managing timing around portfolio realisations, treating it as a discretionary activity rather than a structured programme, often leaves value on the table. 

The structural problem nobody names clearly 

Before getting to the financing question, it’s worth being clear about something: for a significant cohort of investment trusts, the discount problem is not primarily about performance. 

As wealth managers consolidate, the funds they run get larger. Larger funds need to be able to trade in and out of positions at scale, which means investment trusts below a certain size simply fall outside their buying universe, regardless of how well the underlying portfolio is performing. The threshold that keeps coming up in the market is around £300 million in assets. Below it, the structural buyer pool narrows considerably. 

This matters for the buyback conversation because it shapes what a buyback can and can’t achieve. A trust with a discount driven by performance or sentiment can close that gap through results. A trust with a structurally limited buyer pool faces a different challenge. The most effective response may be a sustained, well-capitalised buyback programme over time, not a reactive one funded from whatever cash happens to be available. 

A RCF, used deliberately, changes what that programme can look like. 

Why listed collateral is better than most people assume 

There’s a background assumption in parts of the market that lending against listed investment trust portfolios is somehow complicated or impractical. In my experience, it’s the opposite. 

Compare it to a NAV facility secured against a private equity portfolio. With the latter, a lender is typically waiting a significant period of time for a quarterly NAV update, relying on GP-controlled valuations, working with limited price transparency and out of date information. With a listed portfolio, you have daily mark-to-market pricing, full transparency through public disclosures, real-time monitoring, and genuine liquidity in the underlying holdings. 

The risk profile is meaningfully different, and in several respects more favourable. We structure around a conservative LTV, comfortably inside 20% at inception, with covenants on minimum NAV and concentration limits, and a liquidity test requiring that a material portion of the portfolio be realisable within a defined window. Within that framework, drawdown for a buyback works exactly like drawdown for a new investment: you draw when you want to act, repay from proceeds or future cash generation, and carry no cost on undrawn amounts.  The trust draws when it needs to and repays when it can – the structure doesn’t force their hand. 

The mechanics are simpler than the assumption suggests. 

The conversation that isn’t happening 

The gap here isn’t really about appetite, from lenders or from trusts. It’s about framing. 

Boards ask for flexibility and lenders provide it. But too often, the buyback case remains implicit. That means facilities get structured around general liquidity needs rather than around the specific economics of a buyback programme: timing, size, frequency, relationship to discount levels. And it means trusts end up using their facilities reactively rather than as a deliberate capital management tool. 

The sector saw a record 27 mergers, acquisitions and liquidations in 2025, with total assets falling £3 billion even as performance improved. £10.2 billion of buybacks and £9.5 billion of managed wind-downs dwarfed the £530 million raised by existing trusts. The capital return activity is there. The question is whether it’s being executed as well as it could be, or whether it’s being constrained by how boards and lenders have framed the conversation from the start. 

There’s a better version of this conversation to be had. It starts with calling buybacks what they are: a core capital allocation tool, not just another use of liquidity.   

Ross Dow is Director, Debt Finance at OakNorth, where he works on fund finance origination and execution across NAV facilities, subscription lines, and GP financing. OakNorth provides RCFs to investment trusts with listed portfolios, subject to credit assessment. Views expressed are his own.

Sources 

AIC, Investment Trust H1 2026 Review 

AIC, Investment Trust 2025 Review: Another Record Year for Corporate Activity 

Interactive Investor, The Big Trends Shaking Up Investment Trusts