Investment Trusts  

Invesco Enhanced Income trust to merge to seek scale

Invesco Enhanced Income trust to merge to seek scale

The board of the Invesco Enhanced Income trust has proposed merging it with the City Merchants High Yield trust in a bid to seek scale.

Both trusts are run by Invesco's Rhys Davies, who will continue to manage the merged fund, which will become known as the Invesco Bond Income Plus trust.

The Invesco Enhanced Income trust is £125.8m in size while City Merchants is £192m in size.

According to the board of the Invesco Enhanced Income trust, investors will benefit from the merger through greater scale and a more sustainable yield.

Kate Bolsolver, chairman of Invesco Enhanced Income, said: "The board believes the proposals will provide an attractive and sustainable level of income for [...] shareholders over the long-term whilst also promoting greater liquidity in its shares and a strong long-term share price rating.

"The continuation of investment approach which will be led by the same fund manager and fund management house underpins the clear rationale for the merger, allowing shareholders to benefit from the manager’s strong track record."

As part of the merger, Invesco has agreed the management fee will be cut to an annual amount equal to 0.65 per cent of the total assets less current liabilities to reflect the larger size of the new trust.

This is a reduction from the Invesco Enhanced Income tiered annual management fee with a current blended rate of 0.76 per cent of the trust's net assets.

As far as its investment policy is concerned, the new trust would be managed "on substantially the same basis" as the existing trusts, which both aim to provide a high level of income.

Invesco Enhanced Income has returned 11.59 per cent over the past three years, compared to the 9.69 per cent lost by its sector, the AIC Debt - Loans & Bonds.

Meanwhile City Merchants, which is in the same sector, returned 20.36 per cent over the same period.

damian.fantato@ft.com