Bellevue Healthcare (BHH ) has introduced a zero-discount policy, after a row over liquidity options for shareholders last year, though analysts have warned the new policy risks ‘significant shrinkage’ of the investment trust. 

BHH has previously offered an annual redemption facility which allowed shareholders to cash in all or part of their holding at a fixed point each year. 

The now £277m trust, which owns listed healthcare companies, has shrunk considerably via the scheme in recent years. In October 2024, following a period of poor performance, 36% of its shares were redeemed. The previous year, the figure was 14%. 

In late 2024, the board attempted to replace the scheme with a performance-linked tender offer for just 10% of the shares, but had to abandon the plan a week later after shareholder opposition. 

With BBH’s new discount policy, the board will aim for the share price to trade at or around portfolio net asset value (NAV) via share buybacks. Equally, shares will be issued as necessary to curb any premium the trust goes to. 

In an announcement after the market closed on Wednesday, the policy was touted as allowing shareholders to exit at a ‘known price’ and within a ‘short timeframe’ throughout the year. 

It comes in response to feedback that shareholders were unhappy with the previous ‘one-off’ redemption facility, due to the lack of visibility over what percentage of shares might be redeemed and hence the future size of the listed fund.  

‘Significant shrinkage’

Deutsche Numis chief analyst Ewan Lovett-Turner said the trust today has a ‘significant portion’ invested in large- and mega-caps, meaning it has ‘scope to liquidate the portfolio to fund buybacks’, albeit BBH has been ‘typically relatively concentrated and historically biased towards small/mid-caps.’ 

Lovett-Turner shared concerns, however, that the trust ‘is likely to see significant shrinkage in the near term’. This is partly due to Saba’s 14% stake in the company. The analyst added that Saba’s ‘looming’ presence may have effectively forced the board’s hand, and he expects the New York-based activist to exit using the buyback.

Winterflood’s Emma Bird agreed with this sentiment, noting that ‘with a current market cap of less than £300m, regular share buybacks to maintain the discount close to NAV in the absence of good underlying demand risks shrinking the fund to the point of being considered sub-scale.’

In a Citywire interview published this week, Peter Spiller called for a mass migration of investment trusts towards zero discount policies, where possible, following the example of his own trust Capital Gearing (CGT ).

According to the latest Refinitiv data, Spiller’s firm Capital Gearing Asset Management owns just over 1% of Bellevue Healthcare.

According to Numis data, BHH’s discount has averaged 7.5% over the last year, but this has narrowed in recent weeks, with the trust buying back shares aggressively before the formal announcement of the new policy.