Impax Environmental Markets (IEM) has posted a 26.1% annual return, four months after Saba Capital seized control by installing a new board of directors.
Annual results today showed the £172m investment trust beat its stock market benchmark for the first time in three years, outperforming the 12.7% gain in the MSCI AC World index in the year to 30 June.
Sanjeev Lakhani and Fotis Chatzimichalakis of Impax Asset Management said the portfolio of environmental services companies had enjoyed “multiple sources of return”.
Its best stocks during the year included US chip and interconnector provider Marvell Technology, which benefited from the construction boom in new data centres. Companies enabling electrification such as turbine producer Siemens Energy, cable manufacturer Prysmian and CATL, the Chinese battery giant, had all performed strongly, they said.
However, IEM’s level of outperformance was smaller against the Solactive Global Environment Markets Specialists index the former board adopted as a new benchmark last year. It returned 25%.
In July, after being urged to do so by the activist hedge fund, IEM’s new board of Saba nominees Caroline Bault, the new chair, Jason Chen, Steven Grey and Aaron Morris, served 12-month notice on Impax Asset Management.
This followed sustained criticism by Saba of the trust’s five-year performance with a 3.8% total annualised investment return at 30 June compared to the MSCI ACWI’s 11.9%.
Today the directors said Hudnall Capital had been appointed to advise on the search for a new fund manager. Saba, which emerged with a 32% stake in April after declining to take part in a 78% exit tender offer organised by the old board, is seen as a likely appointment given its interest in growing assets under management.
“As part of the strategic review process the board will continue to engage with all key stakeholders to take into account their viewpoints on the future of the company,” IEM said.
The company declared a first interim dividend of 2p per share up from 1.9p a year ago. It said it would continue to monitor the discount, or gap between the share price and NAV, which widened from 7.2% to 13.5% in the first half of this year. There have been no share buybacks in the current financial year as shareholders, including Saba, did not approve the renewal of its buyback authority at the 17 June AGM at which the previous board was ousted.
Our view
Matthew Read, senior analyst at QuotedData, said: “These are a good set of results for IEM, and are a reminder of what Impax can deliver when its investment style is in favour. Importantly, the gains have come from several directions, with AI-related infrastructure, electrification and grid investment all contributing, while sensible management of the portfolio’s software exposure also helped. Unfortunately, shareholders have captured considerably less of that performance as the discount widened. In some respects this is counter-intuitive as the exit tender provided an opportunity to clean up the share register. However, IEM shrank dramatically as a large swathe of shareholders ran for the exit to avoid being locked in a Saba controlled vehicle, which will not only have reduced liquidity but will also have put upward pressure on the ongoing charges ratio.
“With Saba’s board now firmly in control, we have moved into the phase of seeing whether it can deliver on its previous promises and do better than the board that it ousted. Time will tell but, at this stage, details of what it intends to do remain scant and we cannot help notice that we haven’t seen a monthly factsheet from IEM since the end of June, which feels completely remiss to us.
“There is an uncomfortable irony to the current situation. Just as IEM’s environmental markets strategy appears to be firing on all cylinders, with the managers on notice, shareholders face considerable uncertainty over whether they will continue to have access to it through this trust.”
