Thursday 04 July 2024 11:52 am  |  Updated:  Thursday 04 July 2024 1:56 pm

Investment trusts dropping like flies as mergers hit all-time high

By: Elliot Gulliver-Needham

The number of investment trusts disappearing off the market has spiked during 2024, as mergers and wind-downs have plagued the sector.

The total number of investment trust mergers has already hit an all-time high this year, with six acquisitions going ahead in 2024 compared to five in the entirety of 2022 and 2021, according to data from the Association of Investment Companies.

Despite the record high in mergers, a seventh is scheduled to complete soon, with the merger of two Janus Henderson European trusts. Meanwhile, an eighth and largest in investment trust history between Alliance Trust and Witan, is also in the pipeline.

Along with the mergers, there has been one liquidation during the last six months, Asian Energy Impact Trust, after the fund was forced to suspend its listing for over a year.

There have also been a staggering seven trusts that have voted to wind down: Abrdn Diversified Income & Growth, Abrdn Property Income, Digital 9 Infrastructure, Downing Strategic Micro-Cap, GCP Asset Backed Income, Riverstone Credit Opportunities Income and Triple Point Energy Transition.

Even as more investment trusts have begun to merge, this doesn’t have seemed to have helped the wide discounts to their net asset values that they’re trading on.

Thought the average discount narrowed from 9.7 per cent at the end of 2023 to 6.2 per cent today, this is heavily skewed by the largest investment trust in the country, 3i Group.

Once this trust is excluded, the average investment trust discount has widened from 13.8 per cent to 15 per cent.

Fundraising was also subdued, with no IPOs in the first half of the year, and only £413m raised in secondary fundraising, with over half of this, £266m, raised by JPMorgan Global Growth & Income.

Despite this weak investor sentiment, performance was fairly strong over the last six months, with the average investment trust returning 7.7 per cent.

Meanwhile, buybacks for the first five months of the year totalled a whopping £3bn, up 129 per cent from the same period in 2023.

2023 was also a record year for buybacks, with £3.9bn in share buybacks throughout the year in total, so 2024 looks likely to surpass that.

Richard Stone, chief executive of the AIC, said: “Activity in the investment trust sector remains elevated, with boards prepared to consider all options to deliver value for shareholders. Mergers and buybacks are at record levels and many strategic reviews have been announced, with some trusts deciding to return capital to shareholders.

“The investment trust sector has always evolved through challenging markets, and this is one of those times where we are seeing that in action. While discounts remain wide, it’s encouraging to see that performance for the first half of the year has been strong – the most important measure of success for our sector.”