Investment trust news: Scottish Mortgage, Residential Secure Income and more

Investment trusts are falling like ninepins. We have already reported here the plans of several listed funds to throw in the towel and this week must add more to the list.

More positively, Scottish Mortgage has made good progress on its plan to spend at least £1bn on repurchases of its own shares.

Scottish Mortgage passes £1bn buyback milestone

Scottish Mortgage, one of Britain’s largest investment trusts, has bought back more than £1bn worth of its shares since 15 March, when it announced that it planned to spend ‘at least’ that sum on share repurchases. The progress report comes courtesy of Numis, the broker, which said the £1bn bought back so far represented an 8.3% reduction in the number of Scottish Mortgage shares in issue. ‘We believe this makes it a record for the largest buybacks in a year,’ Numis said. It added: ‘We expect that the approach to buybacks will be unaffected by crossing the £1bn mark, with “at least” being a key component of the board’s strategy.’ Buybacks if carried out when the shares trade at a discount increase the net asset value per share, all else being equal. They are explained in more detail here.

More trusts to disappear

Several more trusts have announced or confirmed plans to wind themselves up and return the proceeds of selling their assets to shareholders. Residential Secure Income, which invests in shared-ownership and retirement properties, said that ‘following a thorough review of options for maximising shareholder value, it is proposing to shareholders that the company adopts a managed wind-down and portfolio realisation strategy’. It added that ‘with a market capitalisation of approximately £101m, the company remains of a size which might deter some potential investors due to lower share liquidity and the increasing demand from investors for larger listed funds’. In addition, it said, ‘the company’s shares have, since September 2022, traded at a persistent, material discount to the company’s net asset value’. Numis said the trust’s board had ‘made a pragmatic and realistic assessment of the fund’s medium-term outlook’.

Atrato Onsite Energy, which owns solar electricity arrays, has agreed a sale of its entire portfolio to two infrastructure investment firms for £218.7m. The proceeds, less costs, will be returned to shareholders and the trust liquidated. Net proceeds are estimated at 80p a share. Numis said: ‘The offer price is at a modest discount to the most recent valuation, but we believe the prospect of a clean cash exit will be well received by investors.’ The broker said the sale ‘in our view represents the best outcome for shareholders’.

Another trust has updated investors on plans already announced to wind itself up. Gulf Investment Fund said it expected its shares to cease trading on 29 October and the first cash distribution to shareholders to be made in early December.

The future of another trust, Miton UK MicroCap, also looks in doubt after shareholders who hold 40.4% of the shares applied to take part in a scheme that allows them to redeem their holdings for cash. The board said: ‘In light of the level of redemption requests received, the board will engage with shareholders over the coming weeks with regards to the future direction of the company. Any retail shareholders wishing to participate should contact the company via mitonukmicrocap@ntrs.com.’

Activist takes big stake in North American Income

North American Income, whose management company recently changed from Abrdn to Janus Henderson, has announced that an American ‘activist’ investor, Saba Capital Management, has disclosed a 6.3% stake in the trust. Activist investors put pressure on companies to change course in a way that will boost the share price or, in the case of investment trusts, narrow the discount. Saba has taken stakes in several trusts, including European Opportunities and Scottish Mortgage, over the past year or so.

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