Amid a tumultuous first half of 2023 for investment trusts, many boards have been taking radical action to shake things up or turn them around.
The first six months of the year saw the closed-ended fund sector deliver an average return of just 0.3%, according to the Association of Investment Companies (AIC), with the average discount widening to 14.0% by the end of June, up from 12.3% on 1 January.
As for the wider UK stock market, arid fundraising conditions remained, with a 76% decline in money raised by existing companies to £952mln.
One source of positivity was the first two new floats since 2021, in the form of Ashoka WhiteOak Emerging Markets Trust and Onward Opportunities, which respectively raised £30.5mln in May and £12.7mln in March.
Another, perhaps, was the proactive approach taken by investment company boards.
At the more aggressive end of the scale, three investment companies fired their fund managers and two more have proposed a change.
The trio of changes was at Majedie Investments PLC (LSE:MAJE), Home REIT (Home Retail Group Plc (LSE:HOME)) and Ceiba Investments Ltd (LSE:CBA), where the former managers were Majedie, Alvarium Investments and Abrdn. The former two have since been replaced by Marylebone Partners and AEW UK, while Ceiba is now self-managed after lead fund manager Sebastiaan Berger moved from Abrdn to CEIBA to become chief executive officer.
Proposals have also been made for The Investment Company (LSE:INV) and Mid Wynd International (Mid Wynd International Investment Trust plc (LSE:MWY)) to bring onboard Chelverton Asset Management and Lazard Asset Management, respectively.
Elsewhere, three trusts have been liquidated this year: Blue Planet (LSE:BPW), SME Credit Realisation Fund Ltd (LSE:SCRF) and abrdn Latin American Income. Two more liquidations are scheduled, Secured Income Fund (LSE:SSIF) and Crystal Amber Fund Ltd (AIM:CRS), which both have shareholder approval to do so.
Another eight trusts are undergoing strategic reviews with potential liquidations or mergers on the table.
At a more advanced stage, Civitas Social Housing PLC (LSE:CSH) has shareholder approval for a sale to Wellness Unity Ltd (CK Bidco) and CT Property is seeking shareholder approval for a bid by LondonMetric Property PLC (LSE:LMP), while a merger is in the pipeline between abrdn Japan Investment Trust and Nippon Active Value Fund (LSE:NAVF), pending shareholder approval.
At the less aggressive end of the scale, 10 investment companies have tweaked management fee structures in favour of shareholders, including reductions, tiered fees, and performance fee abolitions.
“In this testing half-year, investment company boards have been proactive and creative in looking for ways to deliver value for shareholders – whether that is through fee changes, mergers, manager changes or even proposing a wind-up of the company," said Richard Stone, AIC chief executive.
“Several strategic reviews are under way, pointing to the possibility of more corporate activity in the second half of the year.
“Investor sentiment has created a challenging backdrop for fundraising and driven discounts to unusually wide levels.
“Historically, times like these have often proven to be good times to buy, but we may see more volatility during the rest of 2023, especially if inflation remains high and interest rates continue to climb.”