Henderson Diversified Income (HDIV ) shareholders have approved its merger with stablemate Henderson High Income (HHI ).

A total of 98% of shareholders in the £121m Diversified Income loan and bond trust voted in favour of the merger with the £202m High Income trust after the former previously warned economic conditions had made its strategy unsustainable.

Under the terms announced at the beginning of October, Diversified Income will wind up, with its cash and assets being transfered to High Income, and shareholders in the former will be able to opt for new shares in the merged trust run by David Smith, or take a full or partial cash exit.

The board of the 5.8%-yielding Diversified Income signalled in July last year that it was considering all options amid concerns about the trust’s shrinking asset base and the sustainability of its high dividend.

In the merger announcement, the board of the trust said it had ‘proved difficult’ for Janus Henderson fund managers John Pattullo, Jenna Barnard, and Nicholas Ware, to invest in loans and it was worried about the ‘effectiveness of the strategy’.

Diversified Income, which was launched in 2007, has seen returns fall short over one, three, five and 10 years. Over the past year it has grown its net asset value (NAV) 7.1%, lagging the 11.3% Loans & Bonds sector average, and making it the second worst performer in the sector.

High Income represents a different proposition with nearly 90% of the portfolio invested in equities and the remainder in fixed interest. However, the fund currently yields more than Diversified Income at 6.6%.

In contrast to Diversified Income, High Income has outperformed over one, three and five years, with NAV growing 5.4% over the past 12 months versus a 3.7% UK Equity Income sector average.

It has delivered a total underlying return of 22.1% over three years and 39.1% over five, although it has lagged slightly over 10 years with a return of 75.5% versus a 76.9% sector average.