This is the last of our weekly emails for 2024. We hope that you have been finding them useful. 2024 has been a year of setbacks and shrinkage for the UK investment companies industry, topped by the cynical and self-serving attack on seven trusts by US corporate raider Saba Capital (there will be much more to say on that topic in the coming weeks). We will be publishing our annual roundup in January, and I’ll be talking through some of the big stories of the year with Andrew McHattie on 3 January, but in the meantime, I thought it might be worth looking back at some of the big stories of the year.
Economic data coming out of China continued to be weak. Elsewhere, investors were talking about the timing of interest rate cuts. Threats to shipping in the Red Sea were an issue for inflation (but would later turn out to have been good news for the ship-leasing companies).
In January, rumours of a possible IPO of Klarna boosted Chrysalis, but shareholders would have to wait until the end of the year for a formal IPO filing (I discussed this here). JPMorgan Multi-Asset proposed a merger with JPMorgan Global Income & Growth. Oakley Capital Investments made a sizable new investment into Steer Automotive Group, the first of a number of new investments for the trust in 2024.
In February, some of the best-performing funds were focused on China, as government stimulus boosted stocks, but Weiss Korea took the crown, aided by news of a drive to encourage more shareholder-friendly behaviour. The trust’s star faded from then on, however, and by November, the managers were saying that they no longer believed in the investment opportunity.
A bidding war broke out for abdrn Property Income during the month, with both Urban Logistics and Custodian Property Income REIT vying to take control of the trust. In the end, shareholders backed a managed wind down but were let down by the sale of the bulk of the portfolio at a knockdown price (see here).
Golden Prospect Precious Metals was one of the stars of the sector in March, helped by a steadily rising gold price (the peak for both came around the end of October), but the big winner was Schiehallion, Baillie Gifford’s growth capital trust, which saw a dramatic narrowing of its discount over the month. While the roller-coaster ride continued over the rest of the year, the trust seems to be finishing the year trading fairly close to an NAV that has been improving.
Also in March, Scottish Mortgage announced its £1bn buyback pledge, Janus Henderson’s two European trusts said they would merge, and Tritax Big Box REIT and UK Commercial Property announced terms for their combination.
Rockwood Strategic was one of the best-performing trusts in April, extending its lead over much of the rest of the UK small cap sector and, no doubt, contributing to its well-deserved win in the ‘Best for UK exposure’ category in November’s QuotedData Investors’ Choice Awards. However, the biggest news of the month was the outbreak of a bidding war for Hipgnosis Songs Fund (which coincidentally, helped its then chairman Robert Naylor win his ‘Person of the year award’).
Ashoka WhiteOak Emerging took a pop at Asia Dragon, kickstarting a review that eventually led to Asia Dragon’s upcoming takeover by Invesco Asia.
May was a great month for Manchester & London as its AI-related stocks soared. The NAV and share price peaked the following month, but this trust and the two technology trusts – Allianz Technology and Polar Capital Technology – still seem set to be amongst the best-performing of all investment companies over 2024.
Foresight Sustainable Forestry was taken over at a substantial premium to its prevailing share price. Asia Energy Impact said it would wind up, as did GCP Asset Backed Income and abrdn European Logistics. An IPO was attempted – for Special Opportunities REIT – but unfortunately failed.
The European Central Bank cut its interest rate in June. The largest NAV increases over the month were on Indian trusts, but for the most part progress over the second half of 2024 was fairly gentle. It looks as though abdrn New India will take the crown for the best performing of these trusts over 2024.
The big news of the month was the announcement of the Alliance Trust/Witan merger, catapulting the combined trust into the FTSE100 (we talked to the manager about the deal recently). Regional REIT was hit as it raised money to pay down debt, and bidders circled around Tritax EuroBox. In the end, its portfolio was effectively carved up between Brookfield and SEGRO.
Aberforth Geared Value and Income Trust was launched as a rollover vehicle for Aberforth Split Level Trust.
In the US, Joe Biden dropped out of the race for the White House. In the UK, Labour won the election and immediately started to warn of tax rises in a forthcoming budget, triggering outflows from the UK market as investors looked to crystallise their capital gains. The Japanese yen soared, contributing to some savage swings in markets early in the month.
Castlenau was amongst the best performers of the month, helped by the revaluation of its stake in Dignity. Crystal Amber also did well, there has been some good news coming out of its remaining holdings as that trust nears the end of its life.
JPMorgan’s Japanese smaller companies trust said it would merge with JPMorgan Japanese. Home REIT said it would wind down.
The Bank of England cut rates in August. Emirates agreed to buy aircraft from Doric Nimrod Air Two, the associated rally in the aircraft leasing funds helped push them towards the top of the leader board for 2024 as a whole. Artemis Alpha said it would be absorbed by Aurora. Starwood launched a bid for Balanced Commercial Property Trust.
JPMorgan Global Core Real Assets lost its continuation vote. Pershing Square Holdings, which had already been knocked by a profit warning from Universal Music towards the end of July, was hit again as the IPO of a US version of the company was pulled for lack of interest.
The Federal Reserve cut interest rates by 0.5% in September. China unveiled some stimulus measures designed to support its economy, but most commentators feel that more is needed. Chinese trusts soared during the month but have fallen back since.
The sector appeared to win its argument in the long-running costs disclosure debacle as the government announced changes to the rules. However, the FCA still seems determined to undermine the industry’s attempts to secure fair treatment.
Ecofin US Renewables Infrastructure failed to find a buyer for its portfolio and opted for a managed wind down instead. Gulf Investments’ death by a thousand cuts policy finally earned it its mortal blow as its latest semi-annual 100% tender offer tipped it below the board’s minimum size.
October saw Atrato Onsite Energy sell its entire portfolio and announce plans to wind up. PRS REIT put itself up for sale and we finally got to see some accounts from HOME REIT, but only for 2022; more recent figures may take a while yet.
Trump’s decisive election win was the major event of November, triggering some big swings in markets. US small cap trusts were the principal beneficiaries. Trusts such as Baillie Gifford US Growth, with exposure to Trump’s new pal Elon Musk also did well, as Tesla’s share price soared and rumours grew of a big jump in the valuation of SpaceX.
Petershill Partners, which invests in asset management companies, performed well as a big disposal helped fund a sizable special dividend. The recovery in this company’s share price after a poor couple of years makes it one of 2024’s big winners. By contrast, news of the write off of one of HydrogenOne’s investments sent its share price into a tailspin. The discount on this trust is now extreme, and it may be that it rebounds in 2025.
Bellevue Healthcare shrank significantly as investors took advantage of a 100% exit opportunity. Keystone Positive Change said it would offer shareholders a choice of cash or a rollover into an open-ended fund. Edinburgh Worldwide said it would hand back £130m to investors next year.
In December, we have seen Jupiter Green suggest investors choose between cash for their shares or a rollover into an open-ended fund; the demise of Menhaden Resource Efficiency (leaving Impax Environmental Markets as the sole option in that sector); Invesco Perpetual UK switch manager to Artemis; Harmony Energy Income look set to sell its entire portfolio; and Alpha Real Trust plan to delist and buy out minority investors.
However, this month, the big news has been Saba’s requisition of seven trusts, seeking to oust their boards and replace them with its own appointees, with the aim of grabbing the management contracts for these trusts. The early part of 2025 will be all about the fight to block this corporate raider and the aftermath of this.
Running alongside that will be pressure to bring the FCA back onside with the original proposals for cost disclosure reform. If this does not get sorted out, I would expect to see more corporate action in one of the worst affected sectors – renewable energy – next year.
US markets look rich, but then they have done for a while. It will be interesting to see what the practical effects of the new Trump administration will be. The gap between valuations in the UK and the rest of the world will hopefully close a bit in 2025.