With this in mind, here are two trusts that I think should be on investors’ radars in 2026.

Buying the fear

The first is Pershing Square (LSE:PSH) from the FTSE 100. At first glance, this might seem like a fish out of water as it’s linked to Bill Ackman’s New York-based hedge fund.

But UK shareholders (myself included) are grateful for the chance to own a small stake. Because Pershing Square’s share price is up more than 20% this year. And over five years, it’s roughly doubled.

Ackman’s strategy is to invest in established companies facing challenges he believes are exaggerated or temporary. For example, he invested in Chipotle Mexican Grill in 2016 following food poisoning incidents.

In early 2023, he loaded up on Alphabet when the market feared ChatGPT would destroy Google. Then at the start of this year, Pershing Square took a big position in Uber while investors fretted about robotaxis potentially disrupting the firm’s business model.

Ackman has made solid returns from these investments (Alphabet stock’s more than tripled since early 2023). In essence, what he’s doing is buying when fear surrounds high-quality businesses, as Warren Buffett has famously done successfully for decades.

This strategy’s seen Ackman consistently outperform the S&P 500 over the long term. However, it should be noted that the Pershing Square portfolio is very concentrated (just 10-12 stocks). If a couple of his best ideas bomb, then the trust would likely underperform.

Looking to 2026 and beyond though, I’m optimistic that Pershing Square will keep chugging higher. The portfolio holds some extremely high-quality companies (including Amazon now and asset manager Brookfield).

Plus, Ackman says he’s currently eyeing up a couple of interesting opportunities. I wouldn’t bet against him unearthing another gem (lots of quality software stocks are currently cheap, for example, due to AI disruption fears).

With this FTSE 100 trust currently trading at a significant discount, I think it’s worth examining more closely.

A focus on UK quality

Turning to UK-listed shares now, we have Baillie Gifford UK Growth Trust (LSE:BGUK). I like this one for 2026 because its portfolio contains some really high-quality growth companies.

In the six months to 31 October, these helped the trust achieve a total return of 17.7%, beating the FTSE All-Share Index (16%). Top holding, Games Workshop, helped drive this performance.

However, I see quite a few high-quality names in the portfolio that have underperformed the market in 2025. These include credit report firm Experian, data analytics giant RELX, Rightmove, and Auto Trader.

Many digital platforms have struggled as investors worry about the implications of AI, but I suspect these will do better next year. I think investors are underestimating the durability of their data-driven business models.

Elsewhere in the portfolio, we see Guinness owner Diageo and cross-border payments firm Wise. Both these stocks now look good value.

Of course, a refocus on quality stocks might not happen, leaving these holdings out of favour. But with the portfolio valuation low, a 2.75% dividend on offer, and a near-10% discount to NAV, I reckon this one is also worth thinking about.

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The company only joined the FTSE 100 back in December, so it’s fair to say this is a bold pick from Baillie Gifford UK Growth Trust. It has been a fruitful one, though, as the stock has rocketed 51% over the past year.

Underappreciated business

Games Workshop designs, manufactures, and sells fantasy miniatures and tabletop games, most famously Warhammer 40,000 and Warhammer Age of Sigmar. It sells them through hundreds of its own branded stores globally, as well as online and via third-party retailers.

For many fans, painting the figures is the most enjoyable part of the hobby. The company has also given its kits to schools. According to the trust’s manager Iain McCombie, painting the miniatures helped improve children’s concentration, even those that were hyperactive.

Despite the strong share price performance, the trust thinks that Games Workshop is still underappreciated by many investors.

A lot of people still don’t take it seriously. They think it’s a bit of a joke. It’s a kind of hobbyist. It’s for what kids play. You know, how can that be a serious business?

Iain McCombie

However, the financials tell us that this is very much a serious business. Revenue has jumped from £257m in FY2019 to an expected £600m in FY2026 (which began in June). Earnings, free cash flow, and dividends have all grown strongly, while international expansion continues apace.

Profit margins are exceptional and the balance sheet is immaculate. The stock also offers a 2.7% dividend yield.

Valuable IP

Games Workshop is sitting on 30+ years of rich intellectual property (IP). It has signed a deal with Amazon to turn some of that into Warhammer TV content. This has the potential to attract a lot of new fans to the brand and hobby.

What’s interesting, however, is that it took the firm about one year to settle the terms with Amazon. As McCombie points out: “[T]hat negotiation took a long time because the Games Workshop management said…We really care about our IP, we don’t want this to be ruined by Amazon, and we want to make sure that the script and so on is going to fit very much into our heritage.”

This demonstrates how the company makes decisions based on the long-term success of the hobby, rather than chasing short-term profits.

Looking ahead

The stock’s forward price-to-earnings ratio is 31, which is a chunky premium to the wider FTSE 100. This valuation risk is heightened because many consumers are still struggling with the cost of living. While addictive, the Warhammer hobby isn’t cheap, so there’s a chance that sales slow in the near term.

Longer term though, I remain optimistic. There seems to be ample room to grow in Asia, where fantasy games remain very popular. I think the stock is worth considering.

I also think Baillie Gifford UK Growth Trust is worth a look, especially as it’s trading at a 10% discount to net asset value. While there’s always a risk that the discount could widen, the portfolio appears strong. Other top holdings include Auto Trader, Experian, Wise, and AJ Bell.

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I know trying to time investments can be a big mistake. It’s all about time in the market, not timing the market, as the old saying goes.

But if we look at time in broader sweeps, we often see cyclical patterns. And I can’t help thinking we could be heading for a good spell for smaller stocks.

Cyclical pattern

In past bull markets, the FTSE 250’s outstripped the FTSE 100. The smaller index is home to more domestic-focused stocks, and more growth prospects. That all brings more risk, but also more growth hopes than the top-drawer giants.

Conversely, in bear markets, investors often head for blue-chip safety, and the mid-cap index can fall. Are we heading for a new bull market? That’s the tricky question. So far in 2024, the FTSE 100’s up 7.5%, with the FTSE 250 managing 6.5%.

I might not call that a bull market yet. But with September inflation below target, I’m increasingly upbeat about the prospects for 2025 and beyond.

Discount growth

Finding the best growth stocks isn’t easy. But I like investment trusts, and there are plenty of those on the FTSE 250. So why not consider combining the two, and go for something like Baillie Gifford UK Growth Trust (LSE: BGUK)?

The trust “aims to maximise capital growth over the long-term from investment primarily in shares of listed UK equities which have the potential to deliver a total return in excess of the FTSE All-Share Index“.

And that surely has to be most people’s idea of what investing in FTSE 250 growth stocks is all about. It holds stocks like Auto Trader, Experian, Games Workshop, Howden Joinery… quite a diversified mix, really.

I’d say it’s definitely a riskier mix than trusts focusing on income or on FTSE 100 stocks. And with a market-cap of only around £250m, choppy sentiment could mean a volatile share price.

But at the moment, we’re looking at a 14% discount to net asset value. Does that suggest growth shares are cheap? I think it might.

Attractive dividends

The FTSE 250’s also home to investment firm abrdn, with an 8.6% forecast yield. The rocky stock market hasn’t helped the share price. But I can’t help seeing fear based on this being a FTSE 250 stock, and it could still be volatile.

Then there’s Greencoat UK Wind with a 7.9% yield on the cards. It doesn’t have any pricing power over the energy it sells, and it has a fair bit of debt. But it’s one of a number of specialised real estate investment trusts that I’m considering buying.

Others include Supermarket Income REIT, on a forward 8.5% yield, and Primary Health Properties at 7.1%. Both share the risks of their sectors though, and dividends aren’t guaranteed.

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An index with everything

So in the FTSE 250 we have growth, big dividends, pooled investments… the lot. What’s not to like?

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However, it also runs an investment trust that invests solely in UK growth shares. This is the Baillie Gifford UK Growth Trust (LSE: BGUK), a portfolio made up of its “best ideas“.

Here, I’m going to look at the trust’s top two holdings, as of 30 May.

Volution Group

The top position was Volution Group (LSE: FAN), a FTSE 250 stock that currently has a market cap of £707m.

The Crawley-based company makes air quality systems and heat pumps for residential and commercial buildings in the UK, Europe and Australia.

It has grown its earnings per share (EPS) at a compound annual growth rate of 19% over five years. And despite facing inflationary and supply chain pressures, the group’s adjusted operating margin is still surprisingly strong at around 20%.

One trend the firm is benefiting from is a growing public awareness of how much poor indoor air quality (especially mould and damp) can impact health. Management argues that this makes its air quality systems “far less discretionary” in nature, especially for its social housing customers.

Now, there’s a risk that further interest rate hikes to tackle inflation could push the UK economy into a recession. That might hit the firm’s sales.

I have a small position in the stock, but given the economic uncertainty, I wouldn’t feel comfortable making this a top holding.

Games Workshop

The trust’s second largest holding was Games Workshop (LSE: GAW). This is the creator of Warhammer, the most popular tabletop battle game in the world.

Games Workshop already has millions of loyal customers globally, but the numbers could multiply on the back of its partnership with Amazon Studios.

Announced in December, this deal is only agreed in principle so far. But it could see Warhammer 40,000 become a big-budget film and TV series. This would be a major coup for the Nottingham-based business in its ongoing attempts to monetise its vast intellectual property. 

However, this potential hasn’t gone unnoticed by investors who’ve driven the stock up 26.5% in six months. This puts the shares on a price-to-earnings (P/E) multiple of 27.5, which looks quite pricey to me.

So, while I own the stock, I’d rather wait for a possible pullback in the shares before adding to my position.

Would I buy Baillie Gifford UK Growth Trust?

Clearly, I’m not rushing to buy either stock. But would I buy the trust itself? Last week, the trust’s managers said they believe the portfolio has “attractive growth fundamentals and the vast majority of holdings are…high quality and resilient.”

Looking at the rest of the portfolio, which includes Experian, Ashtead and Diageo, I’d tend to agree. All appear to have solid long-term growth opportunities, at least to my mind.

But that’s a problem for me because they’re already in my portfolio, along with Games Workshop and Volution.

So, if I were to also invest in this trust, I’d be risking high levels of overconcentration. That could badly damage my returns if these shares were to underperform in future.

Having said that though, I’d consider the stock if I were building a portfolio from scratch today.

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