Investment company M&A and corporate activity hit a new high in the first half of the year with 17 mergers, acquisitions and liquidations, says Association of Investment Companies.
The winds of change are clearly blowing hard in the UK investment companies’ sector but what is the correct meteorological term to describe the rapid pace of contraction in the London-listed closed-end funds sector?
According to the Association of Investment Companies, a “whirlwind” is the apt analogy for the total of four investment company mergers, four completed acquisitions and a staggering 11 listed funds that liquidated in the first half of the year.
On top of all that, share buybacks leaped 32% to £4.8bn as boards ramped up efforts to narrow share price discounts and return capital to discontented shareholders.
Encouragingly, all this activity has had some impact with the average investment company, excluding 3i Group, trading at 13.9% below net asset value at 30 June. That’s still a wide valuation gap but is better than the 15.3% average discount at the end of 2024.
In addition, 19 investment trusts changed fees and two appointed new managers in response to shareholder pressure over underperformance.
AIC chief executive Richard Stone said: “It has been a whirlwind half-year even exceeding the busy first half of 2024. There have been 17 mergers, acquisitions and liquidations, versus nine in the same period last year, and share buybacks are nearly a third higher.
“Boards have been engaging with shareholders and considering all options to maximise value – we have seen 19 fee changes to benefit shareholders in the past six months.”
Given that extraordinary scale of retrenchment, and that “whirlwind” can refer to a lesser “dust devil”, perhaps a “tornado”, described by Wikipedia as the major wind formation, would be the better comparison?
Whichever destructive analogy you reach for, the list of trusts falling over in the first half included Aberdeen-managed Asia Dragon, which merged with Invesco Asia to form Invesco Asia Dragon (IAD), and Henderson International Income, which was absorbed by JPMorgan Global Growth & Income (JGGI).
Alternative asset funds languishing on wide discounts bore the brunt of acquisition activity with Care Reit, BBGI Global Infrastructure, Harmony Energy Income and Urban Logistics snapped up by rivals or investors with long-term horizons.
The long line of liquidations makes a good quiz for investment company specialists. Could you have honestly named all the following wind-ups from the top of your head?
So far this year the stock market has said goodbye to: Blackstone Loan Financing, Doric Nimrod Air Two, Dunedin Enterprise, Downing Strategic Micro-Cap, Triple Point Energy Transition, Menhaden Resource Efficiency, SVM UK Emerging Fund, Henderson Opportunities, Jupiter Green, Keystone Positive Change and Miton UK Microcap.
Henderson Opportunities and Keystone are interesting because their decisions to wind down and merge with an open-ended fund came after they successfully fought off attempts by activist Saba Capital to oust their boards and seize control.
