RIT Capital Partners (RCP) is slimming down with a tender offer that will see the £3.1bn global multi-asset fund buy up to £300m of its shares at a 15% discount, a move that will boost net asset value (NAV) as its stock currently trades 24% below NAV.
The Rothschild family-backed trust said money to buy the shares from investors would come from a “combination of portfolio realisations, existing liquidity and balance sheet resources”.
It also said it was considering hiking its semi-annual dividends from next year, which could provide a way to stimulate greater demand from income seekers. The growth fund currently yields 2% which, while in line with peers in the Flexible Investments sector, is almost half the 3.8% yield offered by the FTSE All-Share.
The company said the proposed return of capital was not at the expense of share buybacks, which it is committed to continuing. In the past three years RIT Capital Partners has repurchased £378m of shares, more than 11% of its market capital. This helped improve shareholder returns last year with a narrowing in the discount delivering a 16.9% total shareholder return in 2025 that was ahead of the underlying 13.5% advance in the portfolio.
On a muted day for the UK stock market, the trust’s shares jumped 5.5%, or 125p, to £24 in response to the announcement.
RIT Capital shares started to de-rate in late 2021 over what turned out to be largely unfounded concerns over its large exposure to private equity. The widening gap between the share price and NAV has today left shareholders with a zero total return over five years, including dividends, despite the portfolio’s underlying 20% return.
The picture is better over 10 years with a 63% total return from a trust that aims to beat inflation and avoid the worst of stock market crashes.
Chair Philippe Costeletos said: “The board remains focused on delivering superior long-term investment performance while taking actions that enhance value per share and improve the attractiveness of the company to both existing and future shareholders.”
Our view
Matthew Read, QuotedData senior analyst, said: “RIT’s board is right to address the discount, and the proposed tender is at least a recognition that buybacks alone have not been enough to shift the dial. However, the terms leave us with two reservations. If the board is confident that the NAV is a fair reflection of the portfolio’s underlying value, it is not obvious why exiting shareholders need to be offered liquidity at as wide a discount as 15%. That looks very generous to continuing shareholders.
“The other issue is scale. A £300m tender sounds substantial in absolute terms, but it represents less than 10% of RIT’s share capital. That may provide a useful release valve and should be NAV accretive, but we struggle to see it cleaning up the register or removing any overhang in the shares in its entirety. The review of the dividend policy is interesting, although we are going to have to wait and see on that. Ultimately RIT still needs to rebuild confidence in its NAV, its strategy and its discount control framework. We think RIT’s board needs to go further.”
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Hi Matthew,
I like the red comments giving thoughts on market news, but I disagree with your comments on RCP’s tender. No reply expected, i’m sure you are busy, i’m only writing this because i’m lying on a beach in Greece with nothing to do…
You said:
“If the board is confident that the NAV is a fair reflection of the portfolio’s underlying value, it is not obvious why exiting shareholders need to be offered liquidity at as wide a discount as 15%. That looks very generous to continuing shareholders”
You have it completely back to front. Tenders are generous to ex–shareholders at the expense of remaining shareholders.
Firstly, NAV is irrelevant. You can’t eat NAV (unless you are a fund managers paid on %age of NAV!). The REAL price is the market price, what investors are prepared to buy/sell at, taking into account sentiment, supply and demand, etc, not just assets.
Therefore, a tender significantly above market price is a direct transfer of wealth from remaining shareholders to ex–shareholders. The company is choosing to pay sellers more than market price (the REAL price), so more than is necessary, at what can only be at the expense of remaining shareholders. This is obvious fact if you consider the following thought experiment…
A tender is just a structured buy back, at a predefined discount to NAV and a predefined time. So imagine if RCP announced a buyback in the open market at a 15% discount to NAV when market price was a 24% discount to NAV. What would you say about that? Surely, you would say RCP were paying sellers more than they needed to, and that was bad choice for any company, because the company would be choosing to destroy value for it’s remaining shareholders.
In fact, FCA listing rules would not allow an open market buyback at significantly above market price. And why is that? This is what Gemini AI says are the reasons (Note point 3):
Here is why those restrictive listing rules exist:
1. Preventing Market Manipulation
The primary reason is to prevent artificial price inflation. If a company—which often has massive capital reserves—could place buy orders at a significant premium, it would artificially drive up its own stock price. This creates a false impression of market demand and value, which undermines the integrity of the public exchange. Regulators want the market price to be discovered naturally through independent buyers and sellers.
2. Protecting Minority Shareholders (Fairness)
In an open-market buyback, the company executes trades through a broker just like any other investor. Because these trades happen fast, everyday retail investors usually have no idea the company is buying at that exact second.
If a company pays a massive premium on the open market, only the lucky or institutional sellers who happen to execute trades at that exact moment benefit.
In contrast, a tender offer is public, giving every shareholder an equal opportunity to sell their shares at that premium.
3. Preservation of Corporate Waste (Fiduciary Duty)
Paying significantly above market price for shares means the company is overpaying for an asset. This is a poor use of corporate cash and harms the remaining, long-term shareholders who choose not to sell. Listing rules act as a guardrail to enforce fiduciary duty, ensuring management doesn’t overpay a select group of exiting shareholders at the expense of the company’s remaining owners.
A tender offer at least allows a company to buy back a large block of shares at once without the 15% open market buyback restriction… but in this case even that benefit doesn’t apply! The tender is for less than 10% of market cap and RCP has only bought back 11% of shares in the last 3 years! So this tender could have been executed as a buyback at much better terms for remaining shareholders.
You will no doubt tell me that a tender is NAV accretive. Yes, but a share buy back at market price is MORE NAV accretive. A company’s duty is to take the BEST actions for ALL shareholders, not the 2nd or 3rd best actions which benefit ex-shareholders (and mostly professionals) at the direct expense of remaining (mostly retail) shareholders! The company has a duty to promote shareholder value… not EX–shareholder value!
I think any intelligent retail investor will take up this offer and sell and then if he/she thinks the trust a good long term investment they will buy back in ‘on a dip’. I would expect the market price to rise until this tender offer has expired but then fall back to what the market regards as fair value.