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City’s biggest trust bargain hunter merges with US rival

9 June 2020

City of London Investment Group strikes £78.4m all-share deal with closed-end fund specialist Karpus Management of New York.

City of London Investment Group (CLIG) has struck a deal to acquire US-based funds business Karpus Management.

CLIG will issue up to 24,118,400 million shares to fund the deal. Based on its closing share price of 325p last night, the deal equates to £78.4m.

In a stock exchange announcement, CLIG said it had been examining a wide range of opportunities to spread risk and create economies of scale, which in turn would provide greater security and career opportunities for employees.

CLIG was established in 1992 with a focus on investing in emerging markets via closed end funds. It runs money for around 150 institutional clients from offices in London, the US, Singapore and Dubai.

Its directors view the acquisition of Karpus as representing an avenue for significant diversification, while reinforcing its presence in the US.

CLIG chair Barry Aling said in a statement: ‘CLIG shareholders will know that the objective of diversifying our revenue base beyond the capacity-constrained emerging market CEF (closed end fund) universe has been a strategic priority for some years and this merger will result in a quantum leap in realising that goal.’

New York-based Karpus was founded in 1986 by George Karpus and had around $3.2bn (£2.5bn) in assets under management as at 31 May. It controlled 2,273 client accounts as at 31 March, most of which were in balanced portfolios, with 50% invested in closed end funds.

CLIG noted the merger will help diversify the business from more volatile emerging markets and therefore offer more security in earnings.

It also highlighted that Karpus’ clients are largely drawn from the wealth management sector, where earnings tend to be more secure.

Karpus will continue to operate as a distinct entity, with CLIG expecting it to be earnings enhancing in its first full financial year.

‘While the two businesses share many similarities in terms of a CEF-driven investment philosophy and process, they are highly complementary in terms of their markets and client segments with negligible overlap,’ Aling said.

‘ I believe that this combination will result in CLIG becoming the global “Go-To” CEF house, offering a value-driven commitment to long-term investment performance for its clients and enhanced growth opportunities for its shareholders and employees.’

George Karpus added: ‘As we explored a potential relationship of our two firms, we recognised that even though our client bases were different, we were not only achieving excellent investment performance, but we also shared the same view as to the treatment of employees and ownership.

‘This merger of our two firms should make us the biggest and best in the world with respect to closed-end fund investing and should enable this success to continue in the years to come.’

 

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