IpsoFacto Investor Investment Trust News
There have been a number of important announcements from some well known investment trusts, including a number in our portfolios, over the past 6 weeks. We summarise below . . .
1. BACIT Ltd (BACT ) – now Syncona Limited (SYNC)
|07.11.16||Expansion of investment policy and capital raise to evolve into a Life Science Investment champion||Acquisition of Syncona Limited (£319m) from Wellcome Trust and of further share in CRT Pioneer Fund (£27m) from Cancer Research UK in return for issue of shares at 131.15 pence. Open offer to existing shareholders and placing; liquidity option at 131.15 pence for existing shareholders to sell under the open offer and placing.|
|15.12.16||Result of capital raising||243.5m (37%) and 20.9m (3.2%) shares issued to Wellcome and Cancer UK respectively. A further new 7.9m shares issued after settling the 59m shares which took up the liquidity option. There are now 658.4m shares issued.|
|19.12.16||Change of name||To Syncona Limited
Our original comment for Investors Chronicle can be seen at IpsoFacto In the Press on the Home Page
This is now a very different beast to the absolute return fund of origin. It is perhaps not for the faint-hearted but does offer the prospect of long term upside and clearly good access to interesting deal flow/potential investments. One assumes most of those who wanted to keep their original sort of exposure (absolute return oriented) have exited. The current price of 132.5p is just above the offer price and presumably just above the current NAV. This compares, for example, to Woodford Patient Capital (which although not completely similar has a large percentage in biotech) which is on a small discount, as is the Biotech Growth Trust.
2. Electra Private Equity (ELTA)
|08.11.16||Tender offer||Having previously decided to cease being a fund and give notice to Electra Partners, the company has been realising investments. It has £650m of cash and is now seeking to return £200m through a tender offer for up to 4.65m shares (11.55%) at a price range of 4300p to 4650p. This offer is available to shareholders on the register at end of 21 December.|
|19.12.16||Sale of Parkdean Resorts||ELTA will receive proceeds of c.£405m and an uplift to NAV of 50p per share|
The shares which went ex a dividend of 110 p on 15.12.16 are currently trading at about 4560p which seems to be something over a 10% discount to NAV. They are up c. 24% and 218% over 1 year and 5 years respectively; this compares to 14% and 37% for the FTSE All Share. So the performance has been good; shareholder pressure from activist investor Sherborne (Edward Bramson) has forced out Electra Partners and the new corporate structure should reduce costs. The question is whether the new management team can match the deal flow and investment returns of Electra Partners. The company announced a further disposal this morning, the sale of its interest in Innovia, realising c. £106m with an uplift of 52p to NAV. Are all the good investments being sold off? Might be one to consider taking profits on.
3. M&G High Income
|10.11.16||Reconstruction||Cash exit at NAV less costs (max of £350,000 or 0.3% of assets attributable to Income Shares) or rollover option into either M&G OEICs, the Extra Income Fund, the Strategic bond Fund and the Dividend Fund or JP Morgan Elect plc.|
Shareholders should be mindful of any capital gains tax exposure in choosing to take cash as opposed to the rollover options.
4. SVG Capital (SVI)
|12.12.16||First closing of asset sale to HarbourVest||Proceeds of £523m received; a further c.£284m should be received.|
|16.12.16||Results of tender offer||Shareholders received proceeds for 31.36% (the basic entitlement of their shares) at 715p; if more shares than this were tendered, they were scaled back.|
There will be two further tenders for the balance of shares at 715p as set out in the original announcement of 18.10.16.
5. London & St. Lawrence (LSLI)
|25.11.16||Strategic Review||Driven by Aviva who is a large shareholder, the Board is undertaking a review to determine the future of the company; this may result in a wind up and/or rollover.|
The shares are priced at about 364p currently and the discount has narrowed since this announcement to c. 6%. Given a reasonable yield, there seems no harm in holding until the proposals are finalised. This trust is in our Income Portfolio and our Top Five Investment Trusts.
6. BH Macro Limited (BHMG)
|29.11.16||Tender offer and structural changes||Tender offer for all shares at 96% of NAV if 75% of shareholders accept; if between 66.667% and 75% then proposals for liquidation will be put to shareholders. Otherwise, the company will be restructured with lower fees but no share buy backs for a period of two years from 01.03.17.|
Trading at 2111p and a discount of c. 6% (again this has narrowed since the announcement) it looks like the market is expecting the tender offer to be passed by shareholders. Risk averse shareholders may wish to exit now. This trust is in our Alternative Portfolio.
7. BlackRock Income Strategies (BIST)
|30.11.16||Conclusion of strategic review||Change of investment objective to target returns of LIBOR+5.5 per cent (net of fees) over rolling five-year periods; reduction in current dividend, intention to appoint Aberdeen Asset Management and proposed merger with Aberdeen UK Tracker Trust (AUKT). The mandate will be a diversified multi-asset strategy. There will be a tender offer for 20% of shares at NAV less 4% and less costs.|
See our original comments at IpsoFacto In the Press on the Home Page. It is disappointing for the trust to be undergoing yet another change so soon after its change from British Assets; and to see a reduction in dividend (by 20%), although to some extent this is reflecting the reality of a low yield environment – but this might have been anticipated in the original mandate with BlackRock. The board has not covered itself in glory; but the investment performance has been poor. At a current price of 107.9p (a discount of 10%) the yield going forward, once the cut is implemented, should be c. 4.8%, which is still reasonably attractive. This trust is in our Income Portfolio and our Top Five Investment Trusts.
8. Aberdeen UK Tracker (AUKT) – see above
With a price of 327p, this trust is at a discount of 7%. Under the terms of the merger with BIST, Shareholders can cash out for up to 40% of their shares at a discount of 2.75% of NAV. Shareholders should probably cash in as much as they can from selling to the company at a discount of 2.75% and, then, if they want to maintain exposure to an index tracker, they should look at an ETF such as FTAL.
9. Alliance Trust (ATST)
|15.12.16||Sale of Alliance Trust Investments||For up to £30m|
|15.12.16||Outcome of strategic review||Move from single manager to multi manager approach; approx. eight of the world’s top equity managers will be appointed to create portfolios of around 20 stocks; target to outperform MSCI All Country World Index by 2%; targeting total annual costs of below 0.60%. More proactive share buy backs.|
Since the US arbitrageur Elliott has been running the show, the ethos of the trust has completely changed. To be fair the discount has also narrowed considerably and now stands at 6%, pretty much the same as Witan. It is unclear to us that Towers Perrin, the pension consultants who have been chosen to appoint the new managers, will necessarily be better at achieving performance than the team at Witan; the recent FCA report on pension consultants is not encouraging. We used to think with this trust that despite the average performance, there might be value in the investment and savings business. The former has been sold for what looks like a disappointing price and the latter may be a wasting asset. A letter today indicates that yet again ongoing charges are going up – although dealing costs are going down. For the buy and hold investor, ATS looks increasingly uncompetitive.