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Capital Gearing’s Spiller backs Gabelli Value wind-up

7 July 2020

Investment trust activist Peter Spiller emerges with 3% stake in Gabelli Value Plus to back moves to wind up poorly performing US value fund.

Investment trust activist Peter Spiller has emerged with a 3% stake in Gabelli Value Plus (GVP ) to back moves to wind up the poorly performing US equities value fund managed by New York-based Gamco.

In an open letter to shareholders, Spiller, chief executive of CG Asset Management and fund manager of Capital Gearing Trust (CGT ) who has built up the GVP position since April, put pressure on Associated Capital Group, a Gamco affiliate, not to use its 28% stake to keep the Guernsey-based fund afloat.

Spiller, who frequently invests in closed-end funds when their shares trade below asset value and presses for moves to narrow their discounts, said his firm would use its 3.1% holding in GVP to vote with the board against the investment company’s continuation at its annual general meeting on 30 July.

GVP, a £110m investment company investing in undervalued US stocks, has disappointed investors since its launch five years ago. Its total return of just 13% compares badly to the S&P 500’s 112% return and the 85% average of North American equity trusts.

In the coronavirus crash in February and March its net asset value (NAV) slumped 26%, prompting Investec Wealth, a large but critical investor, to push for an exit on behalf of its investors.

Last month, having consulted shareholders, the board, chaired by Peter Dicks, recommended GVP investors vote to liquidate the company and return capital to shareholders, a move Spiller today praised as decisive.

Investec, the largest external shareholder with an 18% stake, also immediately publicly supported the wind-up, having severely criticised the board and the fund manager in an open letter from its chief investment officer Chris Hills last year.

Normally, that combination would tilt the balance firmly against the trust’s existence. However, Associated Capital Group, an alternative investment business spun off from Gamco five years ago and chaired by its founder Mario Gabelli, has indicated it would support GVP’s continuation if it hiked dividends to generate a 5% yield, cut charges and promised to buy back shares if the discount exceeded 10%.

In his letter Spiller (pictured) said it was of considerable concern that an affiliated party of the fund manager might influence the company’s future. 

‘Should a majority of the independent shareholders who cast a vote express a desire for discontinuation, confirming the board’s recommendation, it would be problematic if the company continued due to the vote of an affiliated party of the investment manager,’ Spiller said.

Given their close links, he argued Associated Capital Group should have no difficulty in finding other funds or establishing a managed account if it wished to continue investing with New York-based Gamco.

‘This would seem a more sustainable arrangement in the event that a majority of independent shareholders of the company follow the board’s recommendation and vote against continuation,’ he stated.

GVP shares have eased a penny to 111p this morning. They stand on a discount of 7% that has narrowed from 19% in the past month as speculation grows that the fund will be discontinued and money returned to shareholders.


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