City of London IG denies Baillie Gifford trust activism

Emerging market specialist City of London Investment Group (Colig) has denied it has activist intentions towards Baillie Gifford’s Pacific Horizon investment trust.

The board of the £132.4m trust recently announced a discount control mechanism, subject to investor approval, whereby it will offer to buy back shares twice a year if the trust’s share price falls beyond a 9 per cent discount to the net value of its assets.

In a note released last week, following the trust’s results, Numis analyst Charles Cade noted that Colig was one of the trust’s largest shareholders and had “historically been active in pushing funds to implement discount control mechanisms”.

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Mark Dwyer, head of emerging market investment management at Colig, said: “We are not activist shareholders.”

“We are very long term shareholders in [the Pacific Horizon trust]. We do speak to the manager on a regular basis - it is a large investment for us.”

He added that the group had “made its views known” to the board and the manager with regards to performance and that the the proposed changes to the discount control mechanism were “a very good first step” with the board going “some way to addressing issues of price performance”.

Mr Dwyer added while there was “obviously a performance issue” with the trust, the group did not have an issue with Baillie Gifford as an investment manager, and had no plans to try to instigate an emergency general meeting.

James Budden, head of investor relations at Baillie Gifford, said that while it was true to say Colig was one of the biggest shareholders, it had “no activist intentions” and Baillie Gifford was a larger shareholder when savings plans and private clients were taken into account.

“The trust’s performance has been fairly disappointing - the manager and chairman made that clear,” Mr Budden said, adding that the board had spoken to a range of the largest shareholders, which resulted in the offer of a tender twice a year and discount control mechanism, although he stressed that “performance is the key”.

In the year to July 31 the trust’s net asset value per share rose 5.8 per cent, compared to a rise in the comparative index, MSCI All Country Asia ex Japan, of 9.1 per cent in sterling terms.

Meanwhile, the share price increased by 4.8 per cent and the discount widened from 13.1 per cent to 13.9 per cent.

Baillie Gifford announced on Tuesday afternoon that Roderick Snell would be joining the Pacific Horizon trust as deputy manager.

“We have quite a few deputy managers - it’s a pattern we follow,” Mr Budden said.

“Putting extra resource on the trust makes sense.”

Mr Snell currently runs the £49.8m Baillie Gifford Pacific fund.