Invesco Global Equity Income (IGET), the best-performing trust in its sector over five years, will retain over 96% of assets in Franklin Global (FRGT) following a shareholder vote on the merger announced in November.
Holders of 46.28m FRGT shares, 96.3% of the total, yesterday agreed to roll over their investment into IGET, which is trading at a small premium to net asset value, with just 3.7%, or 1.79m, opting for cash.
This means IGET, which has generated a 114% total return to shareholders over five years, should receive around £162m as FRGT is liquidated, lifting its market value to about £460m.
Although this will still leave IGET as the fourth biggest of six trusts in the Global Equity Income sector, it does start to narrow the gap with £859m Scottish American (SAIN) in third place and leaves STS Global Income and Growth (STS) further behind on £275m in fifth. STS’ size has shrunk with repeated share buybacks under its zero discount policy that keeps the stock trading close to net asset value.
Size is important in the investment company world with larger listed funds generally offering lower charges (as a percentage of assets), better liquidity that can attract larger institutional investors, and lower dealing costs.
The Global Equity Income sector houses £7.25bn of assets. It is dominated by the £3.2bn JPMorgan Global Growth & Income (JGGI), which has returned 78.2% over five years, and the £2.1bn Murray International (MYI) which has made just over 105% for shareholders.
IGET’s achievement came shortly before Scottish American published annual results showing it delivered a disappointing 2.4% underlying investment return last year as its under exposure to AI and technology stocks and cyclical stocks weighed on performance, as did falls in obesity drug maker Novo Nordisk and digital payments provider Edenred. Although shareholders did slightly better with a 6.8% gain as the shares’ discount, or gap, to net asset value narrowed, both significantly lagged the FTSE All-World index which returned 14.7%. There was better news on the trust’s quarterly dividends with the total pay-out up 7% to 15.92p per share supported by earnings per share growth of 7.9%. Over five years it lags its benchmark and rivals with a 29% shareholder return.
Our view
James Carthew, head of investment company research at QuotedData, said: “The 96% rollover from Franklin Global to IGET is a brilliant result for the Invesco trust, which appears to be extending its lead over arch rival JPMorgan Global Growth and Income. However, over the past 12 months, both are being trounced by Murray International (NAV up 26.5% to IGET’s 12.8% and JGGI’s 5.3%). In part, MYI and IGET’s success comes from being prepared to take big asset allocation bets relative to the US-heavy global index. MYI’s investment style, with its emphasis on aiming to pay covered dividends, is also well-suited to the current environment.”
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