Border to Coast, the £70bn local authority pension scheme, and wealth manager City Asset Management have joined CG Asset Management in opposition to the merger of HICL Infrastructure (HICL) and its sister fund The Renewables Infrastructure Group (TRIG).
Amir Kia, a portfolio manager at Border to Coast, which has a £5m stake in £2bn HICL, told The Times: “This deal doesn’t seem logical to me. While we support consolidation and the potential economies of scale in the investment trust sector, this proposal appears to prioritise [fund manager] InfraRed’s asset retention, rather than delivering clear benefits to HICL shareholders.”
He also told the paper that paying the equivalent of net asset value (NAV) for TRIG when its shares traded at a 30% discount below that “appears unjustifiable”, adding there were “no evident synergies” for HICL shareholders.
James Calder, chief investment officer at City Asset Management, which runs £1bn on behalf of private investors and has £17m in HICL, attacked the deal as “dreadful for HICL shareholders”.
He objected to the transfer of value from HICL to TRIG, telling The Times. “If you are a TRIG shareholder, it might be a good deal. If you are an HICL shareholder, it is dreadful.”
Although they are small institutional shareholders, their opposition could indicate a groundswell of discontent among HICL investors and a problem for InfraRed Capital Partners, which runs both investment companies, ahead of votes on the deal next month.
Chris Clothier, co-chief investment officer at CG Asset Management, which owns £21m of HICL shares, told The Times he had talked to “multiple HICL shareholders” since the firm announced its opposition to the deal on Monday. He said all those who were not also invested in TRIG were unhappy.
InfraRed fund managers Edward Hunt, who runs HICL, and Minesh Shah, who runs TRIG, have defended the deal. Speaking to Citywire, they reiterated that there had been “an extensive investor consultation” and that major shareholders indicated “a good understanding of the merits for the deal.
“We clearly wouldn’t be out with an announcement like this if we didn’t feel that we’re supported by the shareholder base,” Hunt told Citywire’s Investment Trust Insider.
That indicates their belief that wealth managers Rathbones and Brewin Dolphin, which together hold 20.4% of HICL and 14.7% of TRIG, are on side.
However, the InfraRed duo didn’t address one of CGAM’s key accusations that the merger proposal was motivated by a desire by the fund management group for TRIG to avoid a likely continuation vote next year due to a persistent share price discount that sees the shares stand 32% below NAV. If the vote were to go against HICL, it would mean the loss of its £2.9bn assets for InfraRed.
