Lending to investment trusts: looking across, not up

Written by Mohith Sondhi, Managing Director of Debt Finance at OakNorth 

Over the past year, I’ve had several conversations with London-listed investment trusts that have one thing in common: they’re reassessing their banking relationships. 

Not because the underlying portfolios are weak. Quite the opposite. Many are backed by transparent, mark-to-market portfolios of listed assets with strong diversification and liquidity characteristics. But as larger banks rebalance their balance sheets and refocus their strategies, smaller and mid-sized trusts can find themselves deprioritised. 

It’s not a credit issue. It’s an attention issue. 

A sophisticated market – but not always well served

The listed investment trust market is substantial, estimated at around £260bn, and deeply institutional. Yet trusts seeking facilities in the £10m–£75m range often sit in a grey area: too small to command strategic focus from global banks, too complex for generic lenders. 

We recently supported a London-listed investment trust that had been asked to find a new provider after its incumbent lender exited part of its portfolio. The borrower was fundamentally sound, but no longer aligned with the bank’s internal priorities. 

We stepped in, structured a facility aligned to the underlying portfolio, and delivered at speed. That transaction reinforced something we’ve long believed: sophisticated borrowers in the mid-market deserve the same focus and structuring capability as the largest institutions. 

Looking across, not just up

In many banking markets, attention flows upward – to larger tickets, larger mandates, larger names. 

At OakNorth, we take a different approach. We don’t discriminate by size. Whether a facility is £5m or £50m, clients receive the same level of scrutiny, creativity and delivery focus. Our size allows us to be decisive and agile, without being constrained by internal hierarchies or rigid templates.  

When a lot of lenders look up – we look across. 

For investment trusts, that matters. Lending against diversified, listed portfolios requires thoughtful structuring, clear risk parameters and commercial understanding of how boards and managers operate. 

Structuring with discipline

This recent transaction marked our first with a London-listed investment trust and highlights our growing expertise in fund finance, particularly in structures backed by transparent, mark-to-market portfolios of listed assets. 

Given the strong diversification across listed funds and robust liquidity characteristics of the portfolio, the facility represented a compelling example of how liquid facilities can provide strategic flexibility while maintaining disciplined risk parameters. 

The fundamentals are consistent with our broader fund finance approach: 

• Understand the underlying assets 

• Assess liquidity rigorously 

• Stress-test downside scenarios 

• Structure accordingly 

It’s not about stretching risk. It’s about structuring intelligently. 

A natural extension of our platform

We’ve spent the past few years building credibility in fund finance across subscription facilities, liquidity facilities and GP financing. Lending to investment trusts is a natural extension of that capability. 

As capital markets continue to evolve, I expect more trusts and boards to reassess who they bank with – not simply on price, but on responsiveness, transparency and certainty of execution. 

We’re not trying to be the biggest lender in this space. We’re focused on being the partner that engages properly, understands the portfolio and delivers when it matters.