Investment Companies NED Forum highlights the evolution in investment landscape

Investec Bank plc, a leading international financial services provider, today shared key insights from its annual Investment Companies Non-Executive Directors (NED) Forum, held in London on 15 October 2025. The event brought together NEDs from leading investment companies to examine the current dynamics reshaping the UK investment companies sector, as well as a keynote economic address from Dr Linda Yueh CBE.

Consolidation remains a dominant feature of equity investment companies

Investec’s investment company advisory team spoke to the increase in combinations among equity investment companies, referencing 12 deals announced since the start of 2023. This increase is being driven by a series of factors such as a desire for larger vehicles among private wealth managers, the need to appeal to mass retail (including having appropriate marketing budgets to attract retail investors), meeting the demand of activist investors, and responding to prolonged discounts and weak performance.

The Investec team underlined that they expect various models will continue to be supported in the sector, ranging from large vehicles with appeal to mass retail and private wealth managers, mid-sized companies supported by institutional value investors, through to niche propositions that have specific supportive features. However, where companies do not benefit from these characteristics, Boards may need to take strategic action.

Alternatives sectors continue to address challenges

While consolidation within alternative investment companies has been more muted, there has nevertheless been a significant number of cash takeovers or portfolio sales, as well as mergers with companies outside of the sector, and managed wind-downs. A significant driver of this corporate activity has been due to changes in institutional investor AUM and asset allocation, with those institutional investors wanting to see larger companies with a greater emphasis on capital growth, rather than income, as part of their total returns. The pricing of cash exits suggests that investors may be losing patience with waiting for a recovery in share prices, but the early evidence from wind-downs suggests that the outcome may be mixed. As such, there may yet be some intra-sector consolidation, led by the larger companies and/or those with a demonstrable track record of delivering attractive NAV performance. The sector has an attractive quality of Darwinism, as illustrated by the fact that just one of 48 listed hedge funds launched pre-2013 is still in existence.

Guest speaker, Caspar Rock, CIO at Cazenove Capital (Schroders), highlighted that they had been asking Boards to consider consolidation, including innovative ideas, which would allow an overall reduction in the number of sector constituents but then allow it to flourish again.

Lucy Lewis, Managing Director, Investec Investment Companies Team (Advisory), said: “The equity investment company sector is at the vanguard of the debate over active versus passive asset management.  It continues to respond to changes in the landscape, with Boards focusing on leading companies with scale, relevance and attractive investment propositions. Despite the challenging macro environment, the sector is positioning itself for the future.”

Tom Skinner, Managing Director, Investec Investment Companies Team (Advisory) observed: “Corporate activity within alternatives continues to be a route to address entrenched discounts and lacklustre performance, with support for such action from investors. The concentration of investor support in fewer, stronger, investment companies is likely to be a catalyst for sector renewal and may yet yield consolidation between companies.”

David Yovichic, Head of Investec Investment Companies Team, added: “Corporate activity within the investment company space remains elevated and we were delighted to have the opportunity to bring together so many important decision makers on investment company Boards to discuss some of the most pressing sector trends. We look forward to supporting Boards through our relationships as they navigate varied circumstances.”