A recent slew of liquidations and other corporate actions in the investment trust sector is expected...
A recent slew of liquidations and other corporate actions in the investment trust sector is expected to continue in coming months.
Charles Cade, investment trust specialist with brokerage firm Close Wins, said the spate of activity so far this year is by no means over.
He added trust boards are becoming more pro-active in considering changing management groups and trust mandates.
'Smaller funds sometimes lack the flexibility required for investors to be able to actively trade them. This corporate activity is often a result of trust boards taking steps to remedy the problems of the smaller companies trading on wider discounts,' Cade said.
To name just a few of the recent events, on 27 May it was announced Gartmore's Select Japan Trust is to be wound up and two days later the £23m Liontrust Winners portfolio was proposed for liquidation. The Wigmore Property trust offered a tender for up to £11m of its own shares at a 5% discount to net asset value (NAV) on 9 June.
Following discussions with major shareholders over the persistent discount at which its shares were trading, the board of the £108m Henderson Absolute Return trust on 5 June announced a tender offer for up to 50% of the shares on issue at a discount of 9.5% to NAV.
Cade said: 'So far this year the changes have tended to happen among smaller funds trading on wide discounts, but poor performance has also sometimes been a reason for corporate activity. I do see more of this occurring this year and it is likely to occur within smaller and emerging markets portfolios.' The two trusts, both of which have less than £30m in assets.
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