Schroders has confirmed it is in advanced talks to buy a "significant" stake in renewables infrastructure manager Greencoat Capital.
Responding to speculation this morning, Schroders said there could be "no certainty" the talks would lead to a final agreement.
It added: "Schroders continues to evaluate potential acquisition opportunities in line with its strategy to build a comprehensive private assets platform and enhance its leadership position in sustainability."
Greencoat Capital claims to be one of Europe’s largest renewables investment managers with more than £6bn in assets under management across five funds, which aim to provide secure income while accelerating the transition to a low-carbon future.
Also this morning the Schroder UK Mid Cap trust revealed it had outperformed its benchmark by just under one percentage point as it reaffirmed its high conviction approach.
The trust’s net asset value total return for the year to the end of September was 41.8 per cent, compared to 40.9 per cent for its benchmark, the FTSE 250 ex Investment Trusts Index.
Its share price discount to NAV fell from 19.4 per cent in September 2020 to 7.8 per cent at the end of September this year, but the trust said it had widened since then because the UK equity market dropped amid inflation and supply chain concerns, as well as reduction in overseas investors’ recent enthusiasm for UK assets.
The trust’s chairman Robert Talbut said there were plenty of mid-cap companies which had surplus cash to grow their businesses and reward their shareholders, and many of these had “strong outlooks” underpinned by longer-term structural trends such as energy transition, cyber security, the growth in gaming and online retailing and fintech.
“These are all areas where the UK excels and the portfolio managers believe that they can still find opportunities within these and other sectors at compelling valuations.”
He added: “The events of the last two years have shown the merit of the manager continuing to apply a high conviction approach of selecting resilient companies which can also deliver good earnings growth based upon clear competitive advantage.”
The trust’s manager, Jean Roche, said the top contributor over the period was Grafton, a distributor of building materials, to which the trust has an exposure of 3.7 per cent.
Its biggest holding, fund management firm Man Group also performed well, reporting record-high funds under management in Q3.
Roche added that inflation in the energy market may prove more sticky than expected, and the importance of stock picking in this sector cannot be overestimated.
She said: “More broadly, companies with niche products exposed to structurally growing markets will also be better able to pass on rising costs to the consumers of their products.”
CPI rose by 5.1 per cent, pushed up by rising transport and energy costs.