abrdn Diversified Income and Growth’s board has announced that it has commenced a strategic review.
The obvious problems that the trust faces are its discount, which was about 26% last night ahead of this announcement, and its shrinking market cap, which at £255m is not a bad size but the board feels limits the scope for the board and its investment team to pursue the widest possible range of attractive investments.
The board will immediately consult with shareholders and welcomes their views on the best strategic option for the company. The company will update the market on the progress of the strategic review in due course, noting that at this stage there can be no certainty as to the final conclusions and/or outcome of the review.
The chairman, Davina Walter, said (our emphasis): “While the board is encouraged by the management of the company’s portfolio, the company’s shares continue to trade at a persistently deep discount to net asset value. It is the board’s view therefore that a strategic review of the company is required to consider how we can best optimise value for shareholders. As part of this exercise, we will consider all options, including, but not limited to, a combination with an existing investment trust. Our focus will now be on seeking feedback from shareholders, commencing productive discussions with relevant parties and updating the market on the outcome of the review in due course.
QD’s take on this
Three funds in the Flexible Investment sector aim to combine a diversified portfolio, an attractive yield and lower volatility than equity markets – abrdn Diversified Income & Growth, Momentum Multi-Asset Value Trust (the former Seneca Global Income & Growth) and JPMorgan Multi Asset Growth and Income. Momentum Multi Asset Value announced that it felt that it was too small to be viable a few weeks ago. JPMorgan Multi Asset faces a continuation vote at its July AGM.
Based on five-year NAV returns, the best of these is the JPMorgan fund, which ranks sixth of 24 funds in the sector and has generated about 1.2% per annum more on average than the abrdn fund and 1.6% per annum more on average than Momentum Multi Asset Value. The JPMorgan fund also trades on the best rating of the three. At last night’s close it was on a 4% discount, while even with its planned liquidation, Momentum Multi Asset Value Trust was on a 7.5% discount. Based on this, JPMorgan Multi Asset Growth and Income is the obvious consolidator, and with a market cap of £71m it could do with being a lot bigger.
We cannot help but feel sorry for shareholders in abrdn Diversified Income & Growth who have endured endless rethinks of strategy and changes of manager. The push into private investments that was the latest great idea (not that long ago) effectively means that even if exasperated investors just say they want their money back, it is going to be a long wait.
That complicates any merger idea too, but it could be managed. I’ll explain how on this week’s show.
ADIG : abrdn Diversified Income & Growth next out the door?
I am a long term ADIG shareholder 30 years + whilst performance has been poor it has constantly provided good dividends – and there has been decent dividend growth lately, the board as not given the recent review and change of investment style to bed in probably it prob needs at least 10 years – not 18 months !!!! even the basic ethos of investing is to hold for 5 years – The role of an investment trust is to have a fixed amount of capital which means the fund manager does not have to worry about redemptions and concentrate on investing. However these days IT boards seem obsessed with growing and worrying about discount instead of concentrating on returns of current investments. Majority of IT’s are running at a discount at the moment, this is totally wrong time to worry about discount and carry out another strategic review. I am now an extremely disgruntled shareholder and will be writing to the board. I also am a shareholder in Caledonia Investment Trust – a self managed investment trust which has constantly run at an 18-30% discount for years and it doesn’t seem to bother them – so why are ADIG boad panicking?
I have a lot of sympathy for your view. It seems far too soon after the last strategy change to be throwing everything up in the air again. My guess is that it will struggle to find a merger partner, end up liquidating and that this will take a long time – which is probably the last thing that most ordinary shareholders want
ADIG board seem happy to take their salaries and not panic at all despite the fact that they could not find one other trust that was prepared to merge portfolios implying questions of quality and valuations. They are the only Aberdeen Trust over the last year to amount a strategic review and end up doing nothing. It is odd that any shareholder is happy to take the yield as the capital is whittled away …the board are lucky to have people like Simon as shareholders but most investors in trusts do not want annuities. It is time to implement what will probably be a slow wind up in the hope that the board is overseeing the valuing the portfolio correctly….but it has been time for years which raises questions.