The Association of Investment Companies (AIC) revealed there has been a whirlwind of corporate activity in the first half of 2024 as investment trust boards battled wide discounts.
Six mergers between investment trusts mean that 2024 is already a record year. The previous record was five mergers in both 2021 and 2022.
Buybacks in the first five months of the year totalled £3 billion, up from £1.3 billion in the same period of 2023 – an increase of 129%, according to Winterflood.
This means that 2024 looks likely to beat the record for buybacks set in 2023 (£3.9bn for the entire calendar year).
While there was only one liquidation during the period – Asian Energy Impact Trust – seven trusts approved plans to realise their assets and return capital to shareholders.
These are 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.
AIC CEO Richard Stone 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.”
The AIC added: “Investment trust boards were active in negotiating lower fees for shareholders.
“A total of 18 trusts made fee changes to benefit shareholders, including 11 reductions in base fee and nine reductions to tiered fees (more than one type of fee change may happen at the same time).
“Though the average industry discount narrowed from 9.7% on the last day of 2023 to 6.2% at the end of June 2024, these figures are skewed by 3i Group, which trades at a hefty premium.
“Excluding 3i, the average industry discount widened from 13.8% to 15.0% over the period.
“Despite this weak investor sentiment, performance was relatively strong over the six-month period, with the average investment trust1 returning 7.7% on a share price total return basis.”
Fundraising was subdued.
There were no initial public offerings (IPOs) in the first half of the year, and £413 million was raised in secondary fundraising — by existing investment trusts.
More than half of this, £266 million, was raised by JPMorgan Global Growth & Income, with Ashoka India Equity raising £78 million and Invesco Bond Income Plus raising £24 million.