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The FTSE 100 is trading just shy of its all-time high of 8,885 points reached on 10 June 2025. Investors have finally started returning to the UK market after years of underperformance, driven by stabilising interest rates, undervalued blue chips, and strong earnings in cyclical sectors.
Housebuilders have been leading the charge as mortgage rates cool, while precious metals stocks continue to benefit from safe-haven demand. However, not every part of the market has caught up with this momentum. In particular, some investment trusts and closed-end funds (CEFs) remain significantly undervalued, despite holding high-quality assets.
Trusts trade like shares but can often lag behind market movements due to their pricing structure — they’re based on demand for the fund, not just the value of its holdings. That can create buying opportunities when sentiment is slow to catch up to fundamentals.
Two such trusts that currently look like bargains to me are Polar Capital Technology Trust (LSE: PCT) and Unite Group (LSE: UTG).
Polar Capital Technology Trust
This tech-focused trust gives UK investors rare access to a portfolio packed with high-growth US tech stocks. Despite delivering a staggering 474% return over the past decade — equivalent to nearly 19% annualised growth — it still looks cheap by several key metrics.
Its return on equity (ROE) stands at an impressive 33%, showcasing how effectively the trust deploys capital. Meanwhile, its price-to-earnings (P/E) ratio of just 3.38 is unusually low for a tech-focused fund, even if it reflects recent weakness in the US tech market. The price-to-book (P/B) ratio of 0.96 suggests the shares are trading close to net asset value, offering investors solid exposure without overpaying.
That said, the recent subdued performance of US large-cap tech — particularly the ‘Magnificent Seven’ — has weighed on short-term returns. If the US market continues to stall, the trust could remain in limbo for a while longer. But for long-term investors willing to ride out the volatility, the trust’s low valuation and track record make a compelling case that’s worth considering.
Unite Group
I covered Unite Group back in May and I still think it’s a stock worth considering. As the UK’s leading provider of purpose-built student accommodation (PBSA), it’s in a sector with stable demand, strong pricing power, and limited supply.
It operates as a real estate investment trust (REIT), focusing on long-term capital appreciation and income.
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Its 4.4% dividend yield is supported by a very low payout ratio of 38%, giving it room to grow. In fact, dividends have increased by an average of 5.37% annually, underlining its passive income appeal.
Of course, any slowdown in student demand or regulatory change to rental laws could pose risks. REITs are also highly sensitive to interest rates, which have improved lately — but we’re not in the clear yet.
That said, with limited university housing available and growing international student numbers, the outlook remains positive.
What really stands out is the underlying efficiency. Unite has a P/E ratio of just 8.77, a P/E-to-growth (PEG) ratio of 0.03 (suggesting rapid growth relative to price), and an operating margin of 55%. Even more impressive, its free cash flow margin is 74.8%, meaning it retains nearly 75p of every £1 of revenue as cash.
