Investment trust insider on the deal flurry at the end of 2023 – James Carthew: Deals flurry shows trust recovery has just begun
Merger talks and proposals to liberate capital for share buybacks and investments are clear signs investment companies are pulling away from last year’s bear market.
The so-called ‘Santa rally’ over November and December has put some pep into many investors’ portfolios. Rather than any spirit of seasonal goodwill, the principal driver of this has been the dramatic fall in government bond yields. UK 10-year gilts were trading on a yield of 4.7% on 19 October but by 27 December the yield was 3.4%. The picture for US Treasury yields is similar.
There is a strong sense that the next move in interest rates will be down. For those sectors that have been hit hard by rising rates, the recovery is only just beginning.
Normally, you might expect that the pace of corporate activity – which was exceptionally high in 2023 – might slow down as Christmas approached. However, some last-minute announcements are worthy of closer attention.
The first of these is the proposed merger of LXi Reit (LXI) and LondonMetric Property (LMP). I have long been a fan of LXI and last wrote about it in May 2022. Very shortly afterwards, LXI announced a tie-up with Secure Income Reit. That deal allowed it to make material cost savings that helped drive growing earnings. However, rising valuation yields put downward pressure on its net asset value (NAV)…. read more here