The FTSE 100 and FTSE 250 are packed with world-class investment trusts. It means UK share investors have a wealth of opportunities to target huge returns while staying protected from individual stock shocks.
Here are three top picks that I think are worth further research.
Growth share exposure
Polar Capital Technology Trust (LSE:PCT) has been one of the London stock market’s top three best-performing trusts since August 2020, delivering an average annual return of 12.2%.
Given its focus on growth stocks, this perhaps isn’t a surprise — technology shares continue to rocket in value as the digital revolution rolls on.
Nvidia‘s surge to become the first $4trn company last month highlights the enormous growth potential of the tech sector. Microsoft has since matched that milestone too.
These two market leaders are Polar Capital Technology Trust’s biggest holdings (11.6% and 8.1% of the total portfolio, respectively). Other notable tech giants among its 97 holdings include Apple, Meta, Alphabet and Taiwan Semiconductor.
With its focus on growth shares, the trust is in danger of underperforming during economic downturns. Yet I think the long-term potential here — driven by trends like artificial intelligence (AI), cloud computing and robotics — is hard to ignore.
Today it trades at an 8.9% discount to its net asset value (NAV) per share.
Great for dividends
With interest rates receding, real estate investment trusts like Supermarket Income REIT (LSE:SUPR) are becoming increasingly attractive to me.
There’s no guarantee the Bank of England will continue slashing rates, however. So the risk to the property stock’s NAVs remain. But with inflation falling and the UK economy struggling, I’m confident rates will keep falling.
Supermarket Income’s an especially attractive REIT in my opinion. Its focus on the highly stable food retail market means rental income remains stable even if economic conditions remain tough.
Additionally, it’s shaped its portfolio around blue-chip tenants like Tesco, Sainsbury’s, Aldi and Waitrose, reducing the chances of rent collection and occupancy issues still further. FTSE 100 operators Tesco and Sainsbury’s alone account for 74% of total rental income.
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Trusts like this can be especially lucrative for investors seeking passive income. In exchange for tax perks, REITs have to pay at least nine-tenths of profits from their rental operations out in dividends.
The forward dividend yield at Supermarket Income is 7.6%.
FTSE 100 star
Following its merger with Witan Investment Trust in late 2024, Alliance Witan (LSE:ALW) is the FTSE 100’s second-largest investment trust. It’s been going strong since 1888 and has total assets of £5.4bn.
What I like about this one is the exceptional diversification it provides. As well as holding a large collection of US tech stocks, it provides significant exposure to other sectors like financial services, consumer goods, telecoms and industrials.
Other major holdings include Visa, Netflix, Diageo and Airbus. In total, the trust owns shares in 226 global companies.
Like other equity-focused funds, Alliance Witan is vulnerable to broader falls in investor confidence. But over time it’s proved its ability to bounce back and then some — its average annual return since August 2020 is 11.7%.
Past performance is no guarantee of future returns though, but I still think this one can continue to outperform.
