Trust news: Saba backs off, trusts attract bids

Important information – the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

In an eventful period for investment trusts, the American activist Saba has suspended attempts to force votes at several trusts while there has been a spate of bids for ‘alternative’ funds. More trusts have announced fee cuts while others have thrown in the towel and plan to wind themselves up. And there is a new kid on the trust block…

Saba targets

The American ‘activist’ investor Saba Capital rocked the investment trust world in December when it sought to persuade shareholders of seven trusts to vote for sweeping change. After all those proposals were defeated it changed tack and said it wanted investors in four trusts to approve their transformation into ‘open-ended’ funds, which would allow withdrawals at net asset value rather than at a discount.

• Read: 7 investment trusts face crunch votes: what it means for investors

Saba has withdrawn its ‘requisition’ for a special meeting to force CQS Natural Resources Growth & Income to become open-ended while the board completes a strategic review. The board said this followed ‘constructive discussions’ with Saba. The trust is considering a variety of options, including offering a full cash exit at net asset value, raising the dividend and open-ending the trust.

Saba has also withdrawn its requisition for a meeting of shareholders in the European Smaller Companies Trust. In an update published on 14 March, the board said the two parties ‘continue to have constructive discussions and have agreed to allow the good-faith negotiations to continue for a further 30 days, with the aim of achieving an outcome that benefits all shareholders’.

It’s a similar story at Middlefield Canadian Income: the trust said on 21 February that Saba had ‘agreed to withdraw the requisition for a period of 60 days to enable the company and its advisers to formulate proposals that are in the best interests of all shareholders’.

At Schroder UK Mid Cap, the last of the four trusts targeted in the second phase of Saba’s campaign, a requisition was deemed invalid and so far no new requisition has been received. The board said it believed that Saba was now in a position to submit a valid requisition if it chose to do so.

The board of Herald, the technology fund targeted in the first phase of Saba’s campaign, has called on shareholders to vote in favour of the trust’s continuation at its annual meeting on 24 March. Analysts at Deutsche Numis, the broker, said: ‘Turnout will be key here given Saba’s stake of about 29%.’

Shareholders in Henderson Opportunities voted to wind up the trust after they had earlier rejected Saba’s bid to take over its management. About 43% of investors opted to switch their holdings into units of the Janus Henderson UK Equity Income & Growth Fund; the rest chose cash.

The winding up of Keystone Positive Change, another former Saba target, has been approved by 98.8% of shareholders’ votes. About 30% of shareholders voted to switch their investment into units of the Baillie Gifford Positive Change Fund while the remainder opted for cash.

Finally, Montanaro UK Smaller Companies has bought back almost 20m of its own shares, or about 12% of the total, a percentage that matches Saba’s stake at the time. Following the buyback Saba is no longer a shareholder in the trust.

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More trusts attract takeover bids

Care REIT, which owns care homes, has recommended a cash offer of 108p a share, a 9% discount to December’s net asset value, from CareTrust, a similar REIT listed in New York. The offer price represents a 32.8% premium to the shares’ closing price the previous day.

Assura, which owns healthcare properties such as GPs’ surgeries, has received what it called ‘an indicative, non-binding proposal’ of 49.4p a share from two American investment firms10. The board said that, should a firm offer be made on the terms set out, it would be ‘minded’ to recommend it to Assura shareholders. It also said it had turned down another ‘indicative, non-binding proposal’ from Primary Health Properties, a rival fund, for a possible all-share combination at an effective value of 43p per Assura share.

The board of Harmony Energy Income Trust said it had received a ‘possible cash offer’ of 84p a share from Foresight Group, manager of funds such as Foresight Environmental Infrastructure. The offer price represents a 29% premium to the closing share price the previous day. The trust said it would be ‘minded’ to recommend a firm offer at that price. Previously the trust had been in the process of selling its assets.

Disappearing names

Weiss Korea Opportunity Fund has completed a strategic review and the board said it would propose a managed wind-down.

Shareholders of Schroders Capital Global Innovation, the former Woodford Patient Capital Trust, cast 97.7% of their votes in favour of a managed wind-down. Liquidation of the trust got off to a good start with the announcement that its holding Araris Biotech, a Swiss biotechnology company, had agreed to be acquired for an initial $400m plus further contingent payments. The trust said its stake in Araris could be worth up to £19.5m, compared with a value on its books of £2.8m as at 30 September 2024.

The board of Premier Miton Global Renewables has said it is reviewing its options, including a potential wind-down of the trust, ‘with a potential option for shareholders to roll over into a similar open-ended fund’. Shareholders have been asked to vote in favour of continuation at the annual meeting next month to ‘allow the board maximum flexibility to bring forward proposals to wind up or otherwise reconstruct the company’.

More fee cuts

Foresight Solar Fund will no longer pay its management company a fee based on net asset value and will instead base it on a 50:50 blend of NAV and market value. As a result of pervasive discounts on trusts, NAV-based fees tend to be higher. The percentages charged on the newly calculated value of the trust will also fall. The trust said the changes could save it about £1.2m a year.

Partners Group Private Equity’s ‘base’ fee of 1.5% is to move from the ‘higher of NAV or gross assets’ to NAV. The performance fee calculation moves from a ‘deal by deal’ to a ‘fund as a whole’ basis.

The fee paid by Renewables Infrastructure Group will move to a 50:50 NAV/market value basis with an additional fee payable of 0.5% of asset sales and debt refinancings. Analysts at Barclays estimated that the changes would lead to a 22% reduction in management fees.

The annual fee paid by Martin Currie Global Portfolio has fallen to 0.4% of net assets from 0.45%. The change took effect on 1 March.

Greencoat Renewables will from 1 April pay its management company a fee based on a 50:50 split of NAV and the lower of NAV and market value. Currently the whole fee is based on NAV. The current discount is 32.8%.

Management changes

Invesco Perpetual UK Smaller Companies has changed its name to Artemis UK Future Leaders following a change of management company.

Two property trusts, Urban Logistics REIT and Supermarket Income REIT, have announced that they intend to become ‘self-managed’ – Urban Logistics by acquiring its management company and Supermarket Income by employing the current fund managers directly.

Duncan MacInnes, co-manager of Ruffer Investment Company, left the trust with immediate effect last month. Alexander Chartres and Ian Rees have joined the existing portfolio manager Jasmine Yeo as co-managers.

Jonathan Simon has retired as a manager of ‘value’ stocks for JPMorgan American. Graham Spence has joined as co-manager on the value side of the portfolio.

New trust targets cheap rivals

A new trust has listed on the stock market – a rare occurrence in recent years. Achilles Investment Company said its investment strategy would be to invest in the shares of London-listed trusts ‘with a focus on alternative assets … and to seek to maximise value for shareholders through constructive activism’.

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Other news

Smithson is to hold a continuation vote triggered by the trust’s discount. The trust attracted controversy last year when the board first said it would not hold a vote and then changed its mind. This year’s vote will take place at the annual meeting next month.

• Read: Smithson makes changes ahead of continuation vote

The board of BlackRock American Income has proposed a number of changes, including a new ‘systematic’ investment process – ‘combining the power of big data, artificial intelligence and human expertise’ – run by a new team, a change in geographic exposure from North America to solely the US, a one-off tender offer for up to 20% of share capital at a 2% discount followed by a three-yearly performance-triggered tender for up to 100% of share capital, enhanced dividends of 6% of NAV per year and a reduction in management fees.

Shares in the Investment Company have been split on a five-for-one basis, so shareholders have five new shares for each one owned previously. The total value of their holding is not affected.

The board of Schroder British Opportunities has proposed a change of investment strategy under which the trust would invest exclusively in private companies. The change is subject to approval by the Financial Conduct Authority and subsequent approval by shareholders.

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