BSET : British Assets moves to BlackRock
British Assets Trust has announced that, following a review by the Board, it will move its management contract from F&C to BlackRock. At the same time shareholders will be asked to vote in favour of the adoption of a new investment objective and policy for the fund. They will also be offered the chance to tender their shares back to the company at a 2% discount to asset value. AXA (who own 15.7% of the fund) say that, as long as they are still shareholders on the day of the vote, they will vote in favour of the proposals.
Management changes
The new manager of the fund is Adam Ryan. he is head of BlackRock’s diversified strategies team (which runs about £14bn). He has been managing money for 20 years and joined the firm when it was Merrill Lynch Investment Managers back in 1999. The Board has given F&C notice and expects Adam Ryan to take up the reins in January 2015. BlackRock will get the same fee as F&C did (0.4%).
New investment objective and policy
“To aim to preserve capital in real terms and to grow the dividend over the medium term at least in line with inflation.” They say they will scrap the current benchmark (80% FTSE All-Share and 20% FTSE World ex UK) and instead target a total annual portfolio return 4% ahead of the UK Consumer Price Index (“CPI”) over a 5 to 7 year cycle. Crucially, given British Asset’s current high yield, they say that the intention is to maintain the dividend and grow it over time. they will also continue to pay quarterly dividends.
The statement says the new policy will be to “follow a dynamic multi-asset approach”. To start off with c. 40% of the portfolio will be in UK equity income stocks and c. 60% will be invested “on a tactical asset allocation basis.”
The Board thinks that the recent changes to pension legislation might make this objective and policy attractive.
Tender offer and discount control
The statement says that within six months of BlackRock taking over the fund, there will be a tender offer for “at least” 20% of the fund at “2 per cent discount to the diluted, cum income NAV per share (debt at market value) less costs”. They will then use buybacks with the aim of moving the shares to a zero discount