by Dave Baxter, Investors’ Chronicle, 15 December 2023:
The optimists would have you believe that the worst is finally over for the investment trust sector. Interest rates have apparently peaked, wide share price discounts are likely to limit further falls and the reform of cost disclosure requirements could remove one of the many challenges facing the space.
But plenty of funds still need to fight for their future in continuation votes before conditions truly improve..
Take River & Mercantile UK Micro Cap (RMMC), which had a stunning 2020 and 2021 but whose shareholders are currently down to the tune of around 23 per cent over the three years to 8 December…
Without many obvious rivals and with other appealing traits – including a tendency to return cash to shareholders whenever the trust’s market capitalisation exceeds a certain level – RMMC may yet command the loyalty of its shareholders at a continuation vote in March. But some worry this could be a close affair.
“I would expect it to pass given a largely supportive shareholder base. However, performance has not been great so it might be a closer call than some expect,” said Mick Gilligan, head of managed portfolio services at Killik & Co. “If nothing changes in the mood of the market there’s a possibility this one goes,” added QuotedData head of investment company research James Carthew.
One controversial name facing down a continuation vote is Chrysalis Investments (CHRY), the capital growth play sitting on two years of controversy and terrible performance.
The trust’s board has outlined various measures to improve ahead of a continuation vote due in April, including the investment managers going it alone in order to focus exclusively on the trust. The trust also announced earlier this month that it had a potential asset sale lined up that would imply an increase of roughly 5.5p per ordinary share to the trust’s net asset value (NAV). “There’s a £33mn uplift, which to me implies they sold something and might be getting cash back, which could lead them to do a lot of buybacks and argue it’s not a basket case and there’s value in there,” Carthew said.
Read more here