Perpetual Income & Growth, the £466m UK equity income trust that fired Mark Barnett and Invesco in April, agrees to merge with Aberdeen Standard’s Murray Income Trust in sign of consolidation in sector.
Perpetual Income & Growth (PLI ), the £466m UK equity income trust that fired Mark Barnett and Invesco in April, has agreed to merge with Aberdeen Standard’s Murray Income Trust (MUT ) in a signal that long-awaited consolidation in the investment trust sector may be about to happen.
In an unusual move, the board of Perpetual Income said in seeking for a new fund manager via the traditional ‘beauty parade’ of pitches from interested groups, it had become so impressed with the approach of Aberdeen Standard that it decided a merger with the £509m rival was best for shareholders.
Perpetual Income shares jumped 14p or 6.4% to 232 at the news. Murray Income slipped 2% or 16p to 754p.
Murray Income, which is managed by Charles Luke, has a similar income and capital growth objective as Perpetual. It has grown its dividend for 46 years, yields 4.5% and its shares are more highly rated than Murray Income - trading on an average discount of 4.5% in the past year compared to PLI whose shares have trailed their net asset value by 13%.
This gap reflects the better performance of Murray Income, which has provided a 37.7% total return to shareholders over five years while Perpetual Income has slumped by 35%.
The merged trust will have total assets of just over £1bn putting it on a par with Edinburgh (EDIN ), which sacked Invesco and Barnett in December, but behind Nick Train’s £1.8bn Finsbury Growth & Income (FGT ) and Job Curtis’s £1.5bn City of London (CTY ).
Edinburgh switched to Majedie Asset Management and there had been speculation that Perpetual Income would follow suit, leaving the door open to a merger to the former stable mates. Last month Perpetual Income said it was considering a merger.
The coronavirus crash has led to increased investor activism in the investment trust sector with boards under pressure to act in shareholders interests and take steps to reduce the discounts at which many of their shares trade.
A report this month by Numis Securities highlighted the fragmented nature of the sector, with three quarters of trusts at risk of being viewed as too small by wealth managers, with assets under £200m. Mergers are an obvious solution and there will be praise for Perpetual Income’s board in taking this step. However, there will be questions as to why Aberdeen Standard does not seek to rationalise its collection of four UK equity income trusts including Murray Income.