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Goodbye Perpetual Income! Former Barnett trust folds into Murray Income

18 November 2020

After 24 years Perpetual Income & Growth, the UK equity income investment trust that became synonomous with the rise and fall of its former fund manager Mark Barnett, is no more with its merger with rival Murray Income complete.

After 24 years, Perpetual Income & Growth (PLI ), the UK equity income investment trust that became synonomous with the rise and fall of its former fund manager Mark Barnett, is no more with its merger with rival Murray Income  (MUT ) complete.

Shares in the £523m trust, which Invesco’s Barnett managed for 20 years before the company was sacked in April, were suspended yesterday morning ahead of a general meeting at which shareholders voted overwhelmingly to liquidate the company. Gareth Rutt Morris and Andrew Martin Sheridan of FRP Advisory Trading in Bristol were appointed as liquidators.

Shareholders who opted to sell some or all of their stakes in a 20% cash exit will receive 243.5p per share, calculated at a 2% discount to their net asset value (NAV) adjusted for transaction costs and the dividend.

For the remaining Perpetual Income investors rolling over into Murray Income managed by Charles Luke at Aberdeen Standard Investors, their shares were given a formula value for the transaction of 249.7p, while MUT’s were valued at 838.7p. This means Perpetual Income investors will receive 0.297728 of new MUT shares for each PLI share they own.

Murray Income issued 50.9m new shares this morning, taking its total in circulation to over 117m, and in return has acquired £427m of net assets from its former rival. This will swell its portfolio to over £1bn making it the third largest trust in the UK Equity Income sector, ahead of Edinburgh (EDIN ), a former Invesco stable mate that sacked Barnett and Invesco last December and appointed Majedie this year, but behind the £1.5bn City of London (CTY ) and £1.9bn Finsbury Growth & Income (FGT ).

Having been criticised for being too slow in dismissing Invesco, after Perpetual Income saw its previously strong performance under Barnett evaporate following the 2016 Brexit referendum, the investment trust’s board surprised the sector by not appointing a new fund manager. Instead it opted to merge with Murray Income, proving that turkeys can sometimes vote for Christmas.

This impressed analysts who believe the investment trust sector is in bad need of consolidation with too many small and illiquid closed-end funds on the London Stock Exchange struggling to get investor attention.

A report by Numis Securities earlier this year revealed half of trusts – around 185 in total – have a stock market valuation of under £200m which puts them off the radars of many wealth managers, the sector’s biggest buyers.

Numis’ Priyesh Parmar said the merger was ‘a good result’ for both trusts’ shareholders. ‘PLI had been languishing on a wide 15% discount prior to the initial announcement in July while MUT will benefit from being a larger vehicle, with increased trading liquidity and lower costs,’ which he said could attract both retail and institutional shareholders. 

Neil Rogan, chair of MUT, thanked shareholders for their strong support for the transaction. ‘With assets of around £1bn, the enlarged company has significant scale, offering investors low-cost exposure to the market-leading investment team at Aberdeen Standard Investments, led by Charles Luke.’

Perpetual Income chair Richard Laing will join the enlarged trust as a non-executive director, with former PLI non-executive directors Georgina Field and Alan Giles.

Prior to its delisting, Perpetual Income shares had narrowed to a 4% discount below their NAV as Luke, a more growth-oriented investor than the value-based Barnett, took control of the portfolio and aligned it with Murray Income.

Although Perpeutal Income investors largely welcomed the merger, 2020 has been a tough year with their stakes slumping 31% up to October. This reduced their average return over 10 years to 4.9%, below the 5.75% of the FTSE All-Share index, according to Morningstar.

By contrast, Murray Income shares had fallen 18% by October and had generated a 7.9% average annual return in the past decade under Luke, who has managed the 5.7% yielder since 2006.

The shares jumped 2.9% today, with the transaction and an afternoon rally in UK shares lifting them to 854p on a small 1% discount to NAV.

Investment company news brought to you by Citywire Financial Publishers Limited.

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