The macro landscape for Fern’s businesses

Fern Trading Limited (“Fern”) is a company selected by the Octopus Inheritance Tax Service. Fern’s performance should not be viewed as performance information for the Octopus Inheritance Tax Service. The Octopus Inheritance Tax Service will place investors’ capital at risk, and the tax benefits associated with Business Relief investing are contingent on personal circumstances and qualifying criteria. Please see below for the key risks associated with the Service.

Executive summary

Fern Trading Limited (“Fern”) continues to invest in essential services across the UK and Europe – renewable energy, real estate and fibre – backing businesses capable of delivering long-term, asset-backed and contracted revenue streams.  

In 2025, macroeconomic conditions continued to materially impact capital markets, as well as the underlying investment valuations within Fern’s portfolio. Inflation remained elevated relative to long-term norms, interest rates stayed higher for longer, and geopolitical tensions affected energy and broader economic sentiment. While some conditions have moderated, it’s important to recognise that periods of market adjustment are a normal and expected part of long-term investing in infrastructure and real assets.  

However, despite recent market volatility and short-term repricing across infrastructure markets, Fern continues to support sectors where the underlying fundamentals remain compelling. Crucially, its underlying businesses operate in sectors where demand is structural, resilient and underpinned by multi-decade themes such as energy transition, demographic change, housing needs, and digitisation. As we look ahead to 2026 Fern is entering an exciting phase – one defined by renewed opportunity, increased commercial traction, and a clear path to scale. 

This report explores the macro landscape, the progress achieved across Fern’s core sectors, and why the long-term investment case remains strong despite the current challenges being faced. 

1. The 2025 macro environment

Market conditions over the past two years have been shaped by persistent inflation, high interest rates and geopolitical volatility. These forces have naturally impacted asset valuations across many sectors, including renewable energy, fibre and real estate. But 2025 has brought signs that markets could be beginning to stabilise. 

1.1 A more stable interest rate outlook

Inflation is easing, financing markets are calmer, and policymakers are signalling a gradual shift away from the tightening cycle. For long-duration, asset-backed infrastructure investments, this provides an important tailwind and should support a more constructive valuation environment.

1.2 Structural themes driving multi-decade demand

Across Fern’s three sectors, the long-term forces shaping demand have only strengthened: 

• Energy transition and energy security continue to underpin investment in renewables.
• Population growth, demographic ageing and supply shortages support residential property and retirement living.
• Digitisation, cloud, AI and rising data consumption reinforce the need for both electricity and full-fibre connectivity.

These themes are not cyclical – these are structural, long-term global trends and central to the future of the economy.

1.3 Navigating prolonged volatility

Valuation movements are not unusual in real assets, particularly during periods of sustained macroeconomic change. Over the past few years, infrastructure markets have experienced extended volatility. For the particular sectors that Fern invests in, electricity price forecasts have shifted repeatedly, real estate has moved through a broad repricing cycle, and fibre markets have transitioned from a rapid build-out phase into a period of consolidation. These developments reflect normal market adjustments rather than a deterioration in the underlying performance or long-term income-generating potential of the assets. 

For capital-intensive infrastructure assets that rely heavily on debt financing, changes in interest rates, financing availability and market sentiment naturally feed through to valuations and transaction activity. These pressures are affecting valuations across the entire sector, even where individual projects – such as the ones invested in by Fern – remain well funded. Fern’s portfolio is structured to mitigate these risks, benefiting from prudent leverage and long-term funding arrangements.  

2. Renewable energy overview

2.1 Market landscape in 2025

Recent changes in renewable energy asset values largely reflect wider economic conditions rather than any material deterioration in the quality or performance of the assets themselves. Higher interest rates, volatile gas prices and unusual weather patterns have all influenced the sector over the past few years, contributing to short-term pricing across the sector. 

What has not changed is the underlying need for clean, reliable power. Global investment into renewable energy reached a record $386bn in the first half of 2025¹, underling sustained commitment to decarbonisation. 

Geopolitical tensions, including the war in Ukraine and instability in the Middle East, have reinforced the importance of energy security, leading to short-term increases in investment in transitional fuels such as natural gas. These dynamics, along with higher interest rates and supply chain pressures, have contributed to near-term volatility for renewable developers. 

Additionally, lower gas prices in early 2025 reduced wholesale electricity forecasts, prompting a re-pricing across the sector. However, these factors reflect a market performing well, which is generating predictable, contracted income despite broader valuation movements. 

2.2 Supportive government policy and improving economic conditions

Across the UK and Europe, policy remains a central force shaping the renewable energy landscape. Both regions continue to prioritise low-carbon generation, energy security and grid modernisation, creating a supportive environment for long-term investment. 

At the same time, the UK’s broader economic outlook is beginning to improve. Inflation has eased from recent highs, and interest rates are now expected to gradually decline, following the Bank of England’s reduction in base rates in December. As financing costs begin to ease, it becomes easier to move forward with investment decisions that were more challenging during the recent period of high-rate volatility. 

Together, these shifts are laying the groundwork for a more stable investment landscape. As policy support strengthens and economic conditions normalise, market sentiment is expected to improve, benefiting both new renewable developments and existing operational assets. 

2.3 Progress in Fern’s renewable energy portfolio

Fern continues to invest in proven renewable technologies with stable, long-term contracted revenues.

French wind repowering

Across Europe, many early-generation wind farms are approaching the end of their original operating life. Repowering – the process of replacing older turbines with modern, far more efficient models – is becoming essential to maintain the continent’s clean-energy supply.  

Fern is ahead of this trend, having commenced repowering of two sites it has owned since 2019. The first site has been dismantled in preparation for repowering, which will commence in the new year. The new sites will generate at least twice as much energy, and Fern has secured new 20-year French government-backed, index-linked Contracts for Difference for both sites. 

Several other sites are suitable for this process, with one already approved by the Octopus Investments Investment Committee. 

Polish wind and solar co-location

Fern’s large onshore wind farm in Poland, commissioned in late 2023, benefits from its own grid connection, a highly valuable asset in a market where grid capacity constraints are a major bottleneck for renewable development. 

Building on this, Fern is actively reviewing identified opportunities to combine its wind site with a solar asset, using the existing grid connection. The opportunity is being progressed and offers a lower-cost route to expanding generation at the site.

Any decision to proceed would be taken only once this assessment is complete, and where the investment supports Fern’s focus on enhancing established assets in a capital-efficient manner, while continuing to target stable, long-term returns. 

2.4 Structural demand for renewable capacity

Despite short-term market volatility, the long-term outlook for renewable energy remains exceptionally strong. Across the UK and Europe, structural demand for new generation capacity continues to rise, driven by three enduring trends: electrification, decarbonisation and energy security.

• Electrification is reshaping energy systems at pace. The transition to electric vehicles, low-carbon heating solutions and digital infrastructure (including data centres and AI) is increasing electricity demand across both residential and commercial sectors. Even conservative forecasts point to a significant expansion in electricity consumption over the next decade, far outstripping the pace at which conventional generation is being retired. This widening gap reinforces the need for sustained investment in new renewable capacity.
  
• Decarbonisation targets add further momentum. The UK’s legally binding commitment to reach net zero by 2050 – and similar pledges across Europe – means that renewables will continue to underpin national energy strategies. As coal and older gas plants continue to close, wind and solar remain the most cost-effective technologies available at scale. Policy frameworks are evolving accordingly, with governments seeking to accelerate the build-out of clean generation, while addressing constraints such as grid congestion and planning delays.
• Energy security has also become a defining driver. Recent geopolitical events have highlighted the risks associated with reliance on imported fuels. Countries across Europe are therefore prioritising domestic renewable generation, recognising its ability to provide stable, predictable, and sovereign energy supply. This shift is creating long-term visibility for investors, supported by a pipeline of grid upgrades, market reforms and capacity expansion plans.

2.5 Long-term investment opportunity

Together, these factors create a structural, multi-decade opportunity for renewable energy investment. Demand for clean, reliable and cost-effective power continues to grow, and the technologies capable of meeting that demand – particularly wind and solar – are now well established, scalable and competitive.

For long-term investors, the current environment offers a favourable entry point. Lower valuations, reduced developer competition, and improving financial conditions are creating opportunities to access high-quality assets at attractive prices. We remain confident that renewable energy will continue to provide dependable, long-duration income and strong structural tailwinds for many years to come.

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1 Global renewable energy investment still reaches new record as investors reassess risks, BloombergNEF, August 2025

3. Real Estate overview

3.1 Market landscape in 2025

The UK real estate sector experienced a challenging period through 2025, shaped by higher interest rates, elevated construction costs and broader macroeconomic uncertainty. These pressures were felt most acutely by small and medium-sized developers, for whom access to financing and cost inflation constrained development activity. 

Despite these headwinds, signs of stabilisation began to emerge during 2025. As inflation eased and expectations for lower interest rates strengthened, the sector moved through the later stages of its re-pricing cycle. While transaction volumes remained subdued, underlying demand for residential property stayed resilient, supported by long-term demographic trends and a persistent undersupply of housing across many parts of the UK. 

Market conditions also led to a more selective investment environment, with capital increasingly directed towards well-located, needs-driven residential assets. This shift favoured experienced operators with strong delivery track records and access to patient, long-term capital. 

3.2 Supportive policy and planning reform

Government policy continued to play a critical role in shaping the outlook for UK real estate throughout 2025. Housing delivery remained a political priority, with strong cross-party recognition of the need to address chronic undersupply and affordability challenges. 

In May 2025, the UK Government introduced planning reforms under the Draft Planning and Infrastructure Bill, aimed at easing regulatory bottlenecks and accelerating development. These reforms were particularly supportive of SME developers, improving the viability of smaller sites and helping unlock brownfield opportunities that had previously stalled under complex planning regimes. 

3.3 Progress in Fern’s real estate portfolio

Throughout 2025, Fern’s real estate strategy remained focused on delivering long-term, resilient income by supporting experienced operators across essential residential living sectors.

Housebuilding

Fern continued to support the growth of Elivia Homes, an SME housebuilder focused on high-quality suburban family housing across the South East of England. The business operates in regions with long-standing housing undersupply and resilient owner-occupier demand, targeting homes typically priced between £500,000 and £750,000, with selective exposure to higher-value locations. 

Since Fern’s acquisition in May 2022, Elivia has scaled materially. Supported by Fern’s capital and reinvested earnings, the company has acquired over 20 new sites and grown revenues from £60 million in 2022 to over £100 million in 2025. Elivia now controls a development pipeline of more than 6,000 homes across all stages of the planning lifecycle, providing long-term visibility and flexibility. The business operates in markets with sustained demand for high-quality residential property, supported by strong end-buyer appetite and a disciplined approach to land acquisition and cost management.

Retirement living

Fern continued to build scale in retirement living through Rangeford Villages, a specialist developer and operator of high-quality residential communities for people aged over 60. The business operates within a structurally growing segment of the UK housing market, driven by rising life expectancy, an ageing population and a shortage of suitable later-living accommodation. 

Rangeford’s model differs from traditional care homes by targeting residents at an earlier stage of retirement, offering independent living supported by optional, progressive care as needs change. Communities are designed around high-quality amenities and long-term residency, creating stable occupancy and recurring management income once villages are operational. 

Since coming under Fern’s ownership in 2017, Rangeford has expanded from two operational villages to a portfolio of five completed communities, across the UK, with three additional villages in development across the South East. This growth reflects both the resilience of demand and a disciplined approach to site selection and delivery. 

During 2025, Rangeford continued to progress a development pipeline valued at approximately £500 million, including land acquisition for a new village in Oakley, Hampshire. With limited supply of comparable retirement communities nationally, the platform remains well positioned to meet long-term housing and care needs while delivering durable, asset-backed returns. 

Property lending

Alongside equity investments, Fern’s property lending strategy continued to provide resilient, risk-adjusted returns through 2025.  A key part of this has been lending directly to established property professionals through short-duration, asset-backed loans secured against UK residential property and protected by a first legal charge. Independent RICS valuations and conservative loan-to-value ratios provide strong downside protection, while returns are generated through a combination of interest and fees. 

Demand for specialist property lending has remained structural. As traditional bank lending has become more constrained, alternative lenders have played an increasingly important role in supporting housing delivery and regeneration in well-located residential markets. 

A recent portfolio highlight has included closing a £48 million development loan to support the construction of a 26-storey residential tower in Manchester’s Greengate district. The scheme is delivering 250 high-quality homes alongside ground-floor commercial space, contributing to ongoing regeneration at the gateway between Manchester and Salford. 

The development benefits from strong local demand, excellent transport connectivity and a prime city-centre location. Completion is targeted for 2027, with the loan structured to support delivery while maintaining robust security and capital protection for Fern.

3.4 Structural demand across residential living

The long-term fundamentals underpinning UK residential living remained compelling throughout 2025, driven by persistent supply-demand imbalances and demographic change:

• Chronic housing undersupply: Forecasts indicated that approximately 840,000 new homes were expected to be delivered in the five years to 2028/29², significantly below the government’s target of 1.5 million, supporting sustained demand across residential markets.
• Demographic shifts: Population growth, household formation and an ageing population continued to underpin demand for both traditional housing and specialist living sectors.
• Retirement living demand: The growing over-60 population and limited existing supply of high-quality retirement housing reinforced the long-term case for purpose-built communities that support independent living while reducing pressure on wider health and care systems.
• Resilient specialist living sectors: Other needs-driven segments, including care homes, student accommodation and co-living, benefited from favourable supply-demand dynamics, predictable occupancy and income characteristics aligned with long-term investment objectives.

3.5 Long-term investment opportunity

Looking back at 2025, the UK residential real estate market presented an attractive entry point for long-term investors. While higher interest rates constrained short-term activity, easing inflation and improving financing conditions began to support confidence in future valuation recovery. 

Fern’s approach remained focused on essential housing assets supported by experienced management teams and strong structural demand. By targeting needs-driven sectors with enduring relevance, the portfolio was positioned to deliver resilient income and capital preservation across market cycles. 

As planning reform progressed and market confidence improved, well-capitalised investors with patient capital were increasingly well placed to benefit from improved deal flow and reduced competition. UK residential real estate, particularly across core living sectors and property lending, continued to offer compelling long-term investment opportunities. 

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2 Housing completions forecasts for England, Savills, June 2025

4. Fibre overview

4.1 Market landscape in 2025

The UK fibre broadband market went through a significant transition during 2025, moving from an intensive build-out phase to a more commercially focused environment. Earlier years were defined by rapid network expansion, driven by government targets for nationwide gigabit broadband by 2030 and substantial private capital investment. By 2025, much of this heavy construction phase was nearing completion for many operators. 

As the market matured, new pressures emerged. Rising interest rates and higher build costs placed strain on highly leveraged alternative network providers, while concerns around overbuild and competitive intensity prompted many to rapidly slow build. This also had a knock-on effect on asset valuations. Investor focus increasingly shifted away from growth driven by capital deployment towards the sustainability of recurring revenue models. 

Despite these challenges, underlying demand for full-fibre connectivity remained strong. Data consumption continued to rise, driven by remote working, cloud adoption and digital services, reinforcing the long-term need for resilient, gigabit-capable infrastructure. 

4.2 Policy drivers and regulatory transition

Government policy remained a key driver of the fibre market throughout 2025. The UK’s commitment to nationwide gigabit-capable broadband by 2030 continued to underpin long-term demand, while regulatory momentum accelerated the transition away from legacy copper networks. 

The planned copper switch-off in 2027, which Openreach has commenced and will continue over the next five years is a prominent catalyst for the move to fibre driving momentum in customer uptake.  

Policy focus also broadened to include digital resilience, productivity and regional connectivity. Together, these priorities reinforced fibre’s role as critical national infrastructure and supported the long-term relevance of high-quality, scalable networks. 

4.3 Progress in Fern’s fibre portfolio

By 2025, Fern’s fibre businesses had largely completed the capital-intensive build phase and entered a new stage focused on commercialisation and scale. The priority shifted to growing customer numbers, securing recurring revenues and maximising the value of existing infrastructure. 

A key development was the launch of Fern’s B2B (business-to-business) wholesale platform in May 2025, which began onboarding high-value resellers who sell onto individual consumers, shortly after launch.

AllPoints Fibre, Fern Fibre Trading Limited’s wholesale brand, successfully transitioned from infrastructure delivery to commercial operations, positioning itself as a national wholesale fibre platform. The launch of Aquila, its wholesale portal, enables business resellers and internet service providers access multiple full-fibre networks through a single, streamlined system. By aggregating third-party networks alongside its own footprint of approximately 500,000 premises, AllPoints Fibre now offers access to more than 19 million properties nationwide. This model supports efficient scaling, improved capital efficiency and long-term revenue growth. 

Fern’s enterprise fibre business, Vorboss, continued to strengthen its position as a leading provider of high-capacity connectivity in London. Operating over 600km of dense fibre across the capital, Vorboss delivers 10Gbps and 100Gbps services as standard. Strategic acquisitions during the year expanded its capabilities across IT support, cybersecurity and managed services, enhancing its ability to meet complex enterprise requirements. A recent contract with the City of London highlighted growing demand and opened further opportunities within the public sector. 

Overall, commercial momentum continued to build, with a clear pathway towards scale, market share gains and cash-flow positivity. 

4.4 Structural demand for fibre infrastructure

The long-term outlook for fibre infrastructure remained highly compelling throughout 2025, supported by several structural demand drivers:

• Rising data consumption: Growth in cloud computing, digital platforms, connected devices and emerging technologies such as artificial intelligence continued to increase demand for reliable, low-latency connectivity. Full-fibre networks consistently outperformed legacy technologies.
• Copper-to-fibre migration: Openreach have started to switch off their copper broadband network. This planned copper switch-off represents a major structural shift for the UK telecoms sector, which will drive increased demand for fibre-based services, particularly across wholesale and enterprise markets.
• Market consolidation: As highly leveraged competitors faced refinancing and balance sheet pressures, well-capitalised, operational platforms with modern infrastructure were increasingly well positioned to consolidate market share and drive sustainable growth.

4.5 Long-term investment opportunity

Looking back at 2025, the fibre sector reached a clear inflection point. While the earlier build phase was capital intensive and valuation pressures persisted, the shift towards commercialisation marked a move towards more predictable, recurring revenues. 

Fern’s fibre strategy remained focused on essential digital infrastructure, built without legacy constraints, supported by minimal debt, and overseen by experienced leadership teams. By prioritising wholesale expansion, scale and operational efficiency, the portfolio was positioned to move towards cash-flow positive operations while supporting the UK’s digital transformation. 

As market conditions stabilised and consolidation progressed, fibre infrastructure continued to offer strong structural tailwinds. For long-term investors with patient capital, the sector remained central to economic resilience, productivity and long-duration value creation.

5. Conclusion

Markets have faced sustained pressure over recent years, and further downward movement in valuations remains possible. That is not unusual for long-term, capital-intensive infrastructure assets, particularly during periods of higher interest rates and economic adjustment. 

Despite this, the long-term fundamentals across Fern’s core sectors remain strong. Demand for clean energy, housing and digital connectivity continues to be structural, enduring and essential. These are long-term investments by nature, and periods of market adjustment are part of the journey. 

Fern remains focused on investing through market cycles, backing essential assets with the potential to deliver long-duration income over time.