In the press

What’s behind more investment trusts joining forces?

by Kyle Caldwell from interactive investor, 25th June 2024:

The investment trust industry has in the past faced criticism for having too many small, sub-standard trusts with assets worth £100 million or less.

This has been changing over the past couple of years, with boards increasingly ringing the changes. Boards have the ability to replace an underperforming fund manager or fund management group, changing the trust’s strategy to broaden its appeal, or to close down the trust altogether.

Another option for small-sized trusts is to merge with a rival to create a bigger pool of assets to avoid continuing to fly under the radar. So far in 2024 investment trust mergers have hit a record yearly high, with six completed and another in the pipeline. This surpasses the previous record of five mergers, which was set in 2021 and 2022.

The biggest merger year-to-date has been between UK Commercial Property REIT and Tritax Big Box, which created a combined company with total assets of £5 billion. The five other investment trusts that have obtained the assets of a rival are Henderson High Income, JPMorgan UK Small Cap Growth & Income, Fidelity China Special, JPMorgan Global Growth & Income, and STS Global Income & Growth Trust..

Boards have also become more proactive in tackling wide discounts, which occur when an investment trust’s share price is trading below the value of its underlying investments, the net asset value (NAV)..

For James Carthew, head of investment companies at QuotedData, the key reason why investment trust boards have increased activity is due to wide discounts.

Carthew explains: “If wide discounts weren’t an issue, there would be far less activity. However, boards are casting around for ways to address the issue and they are regularly being told by the large wealth managers and by some brokers that small trusts fall below the radar and they need to consolidate to survive.

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