Investment Trusts  

ASI takes control of ex-Barnett trust in ‘rare’ merger

ASI takes control of ex-Barnett trust in ‘rare’ merger

The Perpetual Income and Growth investment trust, previously run by Mark Barnett, is to be merged with the Murray Income Trust, creating a mandate with more than £1bn of assets.

Updates to the stock exchange, published today (July 29), showed the board of Perpetual Income and Growth had decided it was in the best interest of its shareholders to combine the assets of the company and merge with the Murray trust, managed by Aberdeen Standard Investments.

The board has been on the hunt for a new manager since it sacked Mr Barnett, formerly Invesco’s embattled head of equities, in April after a prolonged period of poor performance.

Mergers and acquisitions in the investment trust space are rare, with only a handful to occur over the past decade.

“Although consolidation rarely results from manager beauty parades, the board was of the view that a combination of the two companies would bring additional benefits to shareholders, by offering exposure to ASI’s UK equity strategy in a well-managed, and enlarged, investment trust with a highly competitive management fee,” the announcement said.

The new entity will charge fees of 0.5 per cent per year, compared with Perpetual's previous 0.73 per cent.

The Murray Income Trust has a similar investment objective to Perpetual Income and Growth — aiming to provide a high and growing income combined with capital growth through investing primarily in UK equities.

Managed by Charles Luke, the £580m Murray trust has outperformed its peers in the AIC UK Equity Income sector over a one year-, three year-, five year- and 10 year-period, returning 38 per cent over the past five years compared with the average 1.5 per cent from its peers.

By comparison, the £635m Perpetual Income and Growth mandate has underperformed the sector across all time periods, losing 35 per cent over the past five years.

The board said it was expected that Perpetual Income and Growth shareholders would see a reduction in their overall share price yield given the Murray trust had a lower current dividend, but added that the Murrary trust had a “more resilient portfolio income profile than the market”.

In recognition of this, the board of Perpetual Income and Growth will pay a pre-liquidation dividend to shareholders of about 13.6p per share. Investors will also be able to take a “cash option” and remove their investment from the trust if they wish to do so.

The merger is expected to complete in Q4 this year.

Richard Laing, Perpetual Income and Growth chairman, said: “After a thorough tender process, when a number of excellent proposals were received, the board is delighted to recommend the combination.

“We believe this decision will provide shareholders with strong potential for future capital growth and income generation.”

He said while there were “few mergers” of investment trusts, the transaction would boost investors’ net asset value while becoming part of a trust that has an excellent track record and share price rating.