UK (Commonwealth) _ With £5 billion in assets, Alliance Trust and Witan Investment Trust will combine to become one of the largest companies in the UK.
The two firms said in a joint statement on Tuesday that new ordinary shares in the renamed and expanded Alliance Witan investment trust will be exchanged for Witan’s assets, which would be folded into the Alliance Trust, located in Dundee. Alliance is a £3.4 billion investment trust, making it the ninth largest in the UK.
According to the statement, investors would gain from a “new, more competitive management fee structure,” as well as “enhanced” third and fourth interim dividend payments and projections of a “lower” ongoing charges ratio.
It is anticipated that the merged company would eventually qualify for elevation to the FTSE 100 Index.
The agreement upholds the histories of both businesses and is expected to close in late Q3/early Q4. This is the greatest combination of conventional equity investment trusts ever.
Alliance Trust chair Dean Buckley declared that the merger was a “significant turning point” for the sector and that investors will pay less in management fees and other expenses as a result. Both trusts use a multi-manager strategy, distributing money to certain managers with various management philosophies.
According to the Association of Investment Companies, share prices are now below net asset value on average this month due to investor disinterest in trusts. The average discount is 15%.
As a result, the industry has seen some consolidation, such as the £1.2 billion merger of Fidelity and Abrdn’s China trust, and early this year, Scottish Mortgage, the largest investment trust in the UK, proposed a £1 billion share repurchase in an effort to boost its share price. Hedge funds have shown interest in the industry as well.
This combination of two of the biggest and most reputable brands in the investment trust industry is a blockbuster, according to Laith Khalaf, head of investment analysis at AJ Bell. “Investors will pay less annually as a consequence of the arrangement, which will also maintain both trusts’ lengthy dividend histories.”
Mr. Khalaf continued, “Although most active funds avoid investment trusts, most passive funds that track the UK stock market follow the FTSE All Share, Alliance Witan’s inclusion in the FTSE 100 is likely to increase liquidity and visibility for the company.” hence we shouldn’t anticipate a complete paradigm shift from this.
Because they can make a significant investment without holding a disproportionate amount of the trust, institutional investors and pension funds are probably more comfortable experimenting with larger vehicles, which is why scale is probably the bigger driver of liquidity.
The investment trust sector has seen significant consolidation as a result of steep discounts and declining asset prices. However, that isn’t the case here; both of these trusts are sizable enough to continue digging their own holes if they so want.
The Witan trust fund manager Andrew Bell’s impending retirement seems to have been a major driving force behind the merger. The Witan board came to the agreement with Alliance Trust while searching for a replacement.
Given that risk-rated multi-asset funds have essentially replaced single-strategy multi-manager funds like Alliance Trust and Witan, it is possible that this was done to maintain the investing strategy.
Founded in 1888, Alliance Trust plc is a publicly listed financial services and investment firm with its headquarters located in Dundee, Scotland. It is a component of the FTSE 250 Index and is listed on the London Stock Exchange. It’s among the biggest investment trusts in the United Kingdom.
Alliance Trust Company offers flexible trustee services and the advantages of Nevada trust situs by collaborating with lawyers, financial advisers, CPAs, and insurance experts worldwide. The two main parts of Witan’s offering are core and specialty. Shareholders have access to a discerning yet diverse set of managers that invest in superior, primarily big and mid-sized businesses through the core portfolio.
The specialist portfolio acknowledges that many appealing investment possibilities are unlisted or of a specialized character, or they are too large or domiciled for the majority of conventional fund managers to handle. Exposure to specialized asset classes and other possibilities such as Climate Change, Private Equity, Emerging Markets, and Life Sciences is offered by Witan.
