The trusts profiting by mixing public and private stocks

One of the features differentiating investment trusts from other types of funds is that they can be used to gain exposure to unlisted companies. Entire sectors of the investment trust world are dedicated to unquoted assets such as private equity and infrastructure.

Alongside these, which focus exclusively on private investments, there are trusts that mix private investments with listed stocks, with varying degrees of exposure. This can be a useful all-in-one approach that allows investors to gain exposure to both listed and private companies in a certain area or market. But it has its pros and cons.

Mind the limit

Investment trusts are well-suited to holding unlisted assets for liquidity reasons. If the market environment changes and demand for the assets drops, a trust is likely to experience a discount to net asset value (NAV) or, if it already trades on one, to see it widening – but the managers won’t be forced to rush to sell assets in order to return capital to shareholders, as would be the case with an open-ended fund.

Nowadays, companies tend to stay private for longer, so adding private companies can give you access to a broader range of opportunities than sticking with public markets alone. And some of the companies held by equity trusts have delivered impressive growth – the most obvious example being SpaceX, which is owned by various trusts but chiefly the Baillie Gifford-run Scottish Mortgage (SMT), Edinburgh Worldwide (EWI) and Baillie Gifford US Growth (USA). In the five years to 30 June 2025, Scottish Mortgage’s investment in the company returned a more than eight-fold gain, and that was before accounting for the more recent valuation uplifts.

However, there are some potential complications to keep in mind. William Heathcoat-Amory, managing partner at Kepler, argues that having illiquid holdings can leave a trust with a wider discount to NAV when markets are “in risk-off mode”. This is both because private valuations are less transparent, and because it takes longer to sell private assets, meaning that if a trust were to wind up, it might take many months to return the capital to shareholders.

Additionally, investment trusts usually have limits stating how much they can invest in private companies. If that limit is breached, the managers might be prevented from making new private investments, or be required to sell holdings. Because early-stage companies need capital to fund their growth, being forced to miss out on a funding round can impact performance.

The threshold breach can sometimes happen accidentally, for example if a private company grows very fast, or if there is a market downturn and the value of listed investments drops, leaving private companies making up a bigger part of the portfolio. Partly due to SpaceX’s rapid growth, Scottish Mortgage’s exposure to private companies is currently well above its 30 per cent limit, meaning the managers cannot make new unlisted investments.

Private investments don’t always outperform their listed counterparts – relative performance can vary heavily depending on the time period, manager approach, individual investments and so on. In the first six months of 2025, for example, F&C Investment Trust’s (FCIT) overall portfolio return was flat, while the private equity portion of the portfolio was down 3.8 per cent.

The trusts

The table below lists the main investment trusts that have notable exposure to private assets alongside substantial listed holdings. Baillie Gifford dominates in this space; the fund house invests in private companies as part of an aggressive growth approach, and tends to look for exciting companies with outsized growth potential. This can generate outstanding long-term returns, but the ride is likely to be bumpy.

Aside from the much-discussed SpaceX, notable private companies held by Baillie Gifford include TikTok owner ByteDance and the Italian tech conglomerate Bending Spoons. ByteDance is the only unlisted holding in Baillie Gifford China Growth (BGCG), is also held by Fidelity China Special Situations (FCSS), and is in the process of restructuring its US business to bring in US investors so that it can keep operating in the country.

Bending Spoons made up 9.1 per cent of Baillie Gifford European Growth’s (BGEU) portfolio as at the end of January. The company is all about acquiring digital companies and trying to improve their services – acquisitions in the past couple of years have included the community platform Meetup and the video platform Vimeo.

Private exposure is not just the domain of aggressive growth strategies. Two of the trusts with sizeable exposure to unlisted companies sit within the Association of Investment Companies’ ‘flexible investments’ sector, which hosts a wide range of trusts mixing stocks with bonds, gold and private assets.

RIT Capital Partners (RCP) is one of them, and is an example of a trust where the private portfolio has perhaps not worked in the way the managers had originally envisioned.

“[The managers] took the view a decade or so ago that with private companies being able to stay private for longer, they should target their technology exposure towards unlisted companies rather than listed, given it would give them better exposure to the explosive, wealth creation phase of a company’s growth,” says Heathcoat-Amory. So the trust has tended to be underweight the technology sector in the listed portion of its portfolio instead.

“Initially, this paid off, with very strong performance in the period ending 2021, but [it has] suffered from a relatively difficult period since then – both because it is listed technology companies (the megacaps) that have driven performance, and private company valuations sank during this period,” he explains. “That said, in the recently announced results, [it] reported a significant improvement in realisations from [its] private portfolio, with key contributors coming from technology investments made during 2021.”

Caledonia Investments (CLDN), another trust in the flexible investment sector, has one of the highest levels of exposure to private assets and takes a very long-term approach, similar to that of an institutional investor. Its portfolio is split into three building blocks: a listed portfolio of quality companies, a direct private portfolio investing in a handful of UK mid-market companies, and a handful of private equity funds investing in North America and Asia Pacific.

It’s always worth checking what a trust’s private exposure is made up of, because the answer can vary quite substantially. It can be direct private companies, private equity funds, sometimes even investment trusts. F&C, for example, in addition to a range of unlisted private equity holdings, has small positions in listed investment trusts Syncona (SYNC) and Schiehallion (MNTN), which invest in private healthcare companies and growth capital, respectively. Meanwhile AVI Global (AGT), while technically focusing on listed companies, currently has a significant indirect exposure to private assets because it is invested in a range of investment trusts such as Chrysalis (CHRY) and HarbourVest Global Private Equity (HVPE).

Finally, trusts that also take a mixed public-private approach but are a little different include the UK-focused Law Debenture (LWDB), the global Lindsell Train (LTI) and Majedie Investments (MAJE). The first has about a fifth of the portfolio in a private business services business, which helps it generate income; the second has about the same in its asset manager. Majedie uses an unusual strategy that combines external managers, “hard-to-access special investments” and stocks, mixing equities, absolute returns strategies and real assets, but avoiding the more illiquid asset classes such as private equity or venture capital.