BlackRock has scrapped its plan to buy back a large proportion of shares in its recently acquired Income Strategies trust, in spite of shareholders voting in favour of the scheme.
When the BlackRock Income Strategies Trust, formerly known as the British Assets Trust, was handed from F&C to BlackRock, the board put forward a plan to implement a tender offer for 20 per cent of the shares at a 2 per cent discount to net asset value (NAV).
But the board revealed today it was scrapping those plans in light of the narrowing discount on the trust, which is now 2.7 per cent, and having consulted with some major shareholders.
A tender offer is designed to narrow a trust’s discount because it results in the trust buying back its own shares and cancelling them, increasingly the value of all existing shares, while also providing liquidity to those investors hoping to sell out.
Shareholders had voted in favour of the tender offer plan in February, when the change in manager and strategy on the trust was also approved by shareholders.
At the time the discount on the trust was 7 per cent but it has since narrowed considerably as investors have bought into the change in strategy led by BlackRock’s Adam Ryan, head of the firm’s diversified strategies team.
But the board of the BlackRock trust said it “remains committed to ensuring the shares close to NAV and is willing to buy back shares to achieve this”.
It said in September the board would ask shareholders for permission to launch tender offers in the future, likely again to be at a 2 per cent discount, if the discount on the trust ever widens significantly.
Investment trust brokers at Numis Securities said: “On the face of it, it is a concern that the board has decided not to hold a tender, having previously committed to offering shareholders an exit at close to NAV.
“However, it is unlikely that the tender price would have been materially higher than the market price and the board remains committed to protecting the discount on an ongoing basis.
“The tender would have provided liquidity for larger investors to reduce their stake, but we assume that shareholder consultation suggested that they were not seeking an exit.”
Data out today from the Association of Investment Companies suggested the trust’s popularity has soared in the second quarter of 2015. It was the third-most viewed trust on the trade body’s website in that period.
