Scottish Inv Trust plans £1.2bn JPMorgan merger

Ally McKinnon, manager, Scottish Investment Trust

The Scottish Investment Trust plc (SCIN) announced on Wednesday it plans to give up on its in-house management team and independence and combine with the JPMorgan Global Growth & Income plc (JGGI) fund to create a company with an enlarged net asset base of in excess of £1.2 billion.  

In June, The Scottish Investment Trust said it would “undertake a review of the future investment management arrangements of the company.”

The Edinburgh-based contrarian closed-end fund said in June that any proposals would be considered alongside its current management “which the board notes have delivered strong recent short-term performance.”

The Scottish Investment Trust has been managed by Ally McKinnon.

The Scottish Investment Trust chairman James Will said on Wednesday: “The board undertook a lengthy and robust review process and considered a wide range of options for the company.  

“Ultimately, the proposal to combine The Scottish Investment Trust with JPMorgan Global Growth & Income was considered the most compelling outcome for shareholders, allowing for the creation of a company with an enlarged net asset base of in excess of £1.2 billion.  

“Our two companies were both launched in 1887, and this combination will reflect both of their proud histories within a single vehicle with relevance for the investment market place today. 

“JGGI offers a style-agnostic total return approach that has delivered index-beating performance, and it distributes an attractive level of dividend to investors.

On LinkedIn, Scottish Investment Trust manager Ally McKinnon wrote: “Our announcement of a combination with JPMorgan Global Growth & Income heralds a new era for the Scottish Investment Trust.

“It does, of course, bring mixed emotions.

“The self-managed investment trust ‘model’ was created in the 19th century and we were almost unique in keeping this going.

“In recent years we’ve attempted to preserve the very best elements of this model but, at the same time, make the essential changes to ensure the company was relevant for the modern era.

“However, the best option now is that the company adopts a more conventional structure.

“There is a business school cliché that all firms need to ‘get big, get niche or get out’.

“We adopted a niche because it played to our strength as a single product, self-managed company.

“We thought that, through a full investment cycle, a contrarian approach would work as well, if not better, than any other investment style.

“Overall our results to date have not been what we hoped for even though the share price has shown a healthy increase and we’ve paid a good dividend.

“Some have argued that it’s too early to tell if this is the right time to make a change given that investment cycles tend to be very long.

“In fact, some of you have got in touch to point out that such changes often mark the nadir for an investment style.

“These are noteworthy points but the most important thing is that we do the right thing for the company.

“In the era of the investment ‘platform’ it is essential to stand out from the crowd of literally thousands of funds available at the click of a mouse.

“We were extremely successful in explaining our philosophy to an external audience and creating a strong identity …

“I’m immensely proud of the team at the Scottish and would like to thank them for their tremendous work and enthusiasm; Mark Dobbie, CFA, Dawn Gray, Ruby Liston, Igor Malewicz, Jenna McMahon, Kristina Mirbakaite, Martin Robertson, James Webb, CFA, Neill Wood.

“I’d also like to thank the Board for their support and their willingness to think differently; James Will, Mick Brewis, Karyn Lamont, Jane Lewis, Neil Rogan.

“I look forward to catching up with many of you over the next few weeks.”

In a stock exchange statement, The Scottish Investment Trust said: “A large number of proposals was received, and each one was carefully evaluated by the board, with assistance from Stanhope Consulting, against a wide range of criteria.  

“As part of this thorough exercise, consideration was given in turn to retaining the company’s internal investment management structure; to appointing an external third party manager; and to effecting a combination with another investment trust.  

“The board would like to thank all of those who participated in the process, including the incumbent management team.

“The board was particularly impressed by the investment strategy that J.P. Morgan Asset Management deploys for the benefit of JPMorgan Global Growth & Income PLC, and has concluded that the benefits of a combination with JGGI to form an enlarged company with net assets in excess of £1.2 billion would represent the most compelling outcome for SCIN shareholders.  

“The board has therefore agreed heads of terms with JGGI and JPMorgan for a combination of the assets of the company with JGGI by means of a section 110 scheme of reconstruction of the company.

“Implementation of the transaction will result in all SCIN shareholders owning shares in JGGI.

“JGGI and SCIN were both established in 1887, and the combination of the two companies will combine the proud histories of each.  

“JGGI seeks to generate superior total returns from world stock markets, through investing in a diversified, but high conviction, portfolio of appropriately 50 – 90 stocks.  

“Portfolio construction is driven by bottom-up stock selection, underpinned by fundamental research, rather than geographical or sector allocation.  

“The investment strategy is style-agnostic, straddling the conventional classifications of value and growth.  

“The investment management team comprises Helge Skibeli, Rajesh Tanna and Tim Woodhouse, supported by over 80 in-house research analysts located globally.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.