Trust news: Fidelity European absorbs rival, more bids and fee cuts

In another eventful month for investment trusts, Fidelity European is to take over a rival fund while two property trusts that seemed poised to fall to bids from American investors have accepted offers from British buyers instead. Meanwhile many more trusts have announced fee reductions.

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More mergers and bids

Fidelity European Trust and Henderson European Trust have agreed to combine in a deal that will create a £2.1bn fund. Fidelity’s existing team of Sam Morse and Marcel Stötzel will manage the enlarged trust in accordance with Fidelity European’s existing investment objective and policy. The absorption of Henderson European into the Fidelity trust is expected to result in a substantial fall in annual costs. Shareholders in the Henderson fund can request cash instead of shares in Fidelity European at a discount of 1.75% to the former’s net asset value, although total uptake of the cash option is limited to 33.3% of its shares.

• Read: Investment trust best-seller: Fidelity European Trust

Two other European trusts, European Smaller Companies and European Assets, have also announced a merger.

Assura, the property trust, has recommended a cash-and-shares bid from rival London-listed fund Primary Health Properties worth 53.3p a share. It is no longer backing a 50.42p-a-share offer from a group of American investors.

Similarly, Warehouse REIT has dropped its earlier recommendation of a 109p-a-share cash offer from Blackstone, the American investment giant, in favour of a last-minute cash-and-shares offer from Tritax Big Box REIT valued at 111p a share.

The board of Unite Group has submitted a ‘non-binding proposal’ to acquire Empiric Student Property for 30p in cash and 0.09 new Unite shares per Empiric share. Unite said there was no certainty that a firm offer would be made and a further announcement would be made as appropriate.

Downing Renewables & Infrastructure Trust has recommended that shareholders accept an offer from Bagnall Energy of just over 102.6p a share in cash.

Hansa Investment Company has reached a ‘preliminary agreement on the key terms’ of a possible all-share combination with Ocean Wilsons, an investment holding company in which it already holds a ‘strategic’ stake.

Fee cuts

The fee paid by HICL Infrastructure to its management company will change from being based on NAV to a 50:50 split of NAV and market value from 1 July. Analysts at Barclays estimated that the change would result in a fee reduction of 12% on the basis of the prevailing NAV and market value. The trust also announced a new dividend target for 2027 of 8.5p a share.

A similar change will take place at Foresight Environmental Infrastructure in October. The 2026 dividend target has been increased by 2.1% to 7.96p per share.

Schroder Real Estate’s fees will also shift to a 50:50 NAV/market value basis in October.

The annual management fee paid by Schroder AsiaPacific on the first £600m of NAV will be reduced from 0.75% to 0.65%.

Abrdn New India’s management fee basis has changed to market value from NAV.

NextEnergy Solar’s fees are now based on the average of NAV and market value.

Gore Street Energy Storage’s fee will also be based on the average of market value and NAV from 1 October. Performance fees and termination fees in the event of a takeover have been removed. In future the trust will link dividends with operational cash flow rather than maintaining a fixed target.

Manager changes

Brian Lum has taken over as lead manager of Baillie Gifford Shin Nippon from Praveen Kumar. Jared Anderson has been appointed deputy manager. Mr Kumar has also stepped down as deputy manager of Baillie Gifford Japan. Mr Lum is supporting the existing manager, Matthew Brett, with the smaller stocks in the portfolio.

Flavia Cheong is retiring from abrdn Asia Focus. Gabriel Sacks continues as lead manager, supported by Xin-Yao Ng.

Nick Greenwood has stepped down as lead manager of MIGO Opportunities after a 20-year stint at the trust. Charlotte Cuthbertson has been joined as co-manager by Tom Treanor. The portfolio is to become more concentrated and the fee structure revised. The board also expects to introduce a capital return mechanism to limit total NAV to £150m.

Saba developments

CQS Natural Resources Growth & Income is to allow shareholders to exchange up to 100% of the trust’s shares for cash at NAV less costs via a ‘tender offer’. If more than 60% of the shares are tendered, the trust will be liquidated. After the tender, it will target an 8% dividend yield, using capital if necessary, and cut the annual management fee by 0.2 of a percentage point to 1% of NAV.

Saba Capital, the American activist investor that has targeted a number of trusts, has irrevocably undertaken to support the proposals and tender its entire holding of about 29%. Analysts at Numis said: ‘It appears probable that the 60% threshold may be exceeded. The fund is sub-scale, with about £136m of net assets, and further shrinkage looks likely.’

Saba has declared stakes of 5.4% in Worldwide Healthcare and 5.7% in Utilico Emerging Markets.

Trust wind-ups

Schroder Capital Global Innovation, the former Woodford Patient Capital, is to return £30m to shareholders as it winds itself up, although further realisations are not expected until next year or 2027.

VH Global Energy Infrastructure is to propose a return of capital to shareholders via a sale of its portfolio of assets. A shareholder meeting to approve the plan is expected in August.

Syncona, which invests in healthcare startups, has proposed an orderly realisation over the medium term with sale proceeds returned to shareholders. It is also exploring a sale of the entire portfolio of assets at a modest premium to the share price to accelerate capital returns.

We plan to change our investment trust coverage to focus more on trusts of greatest interest to our customers. News about other trusts will be included there as appropriate.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Investment trust shares are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.