Diverse Income to wind-down after 15 years

Diverse Income (DIVI) is set to enter liquidation following a strategic review aimed at addressing its persistent discount and sub-scale status.

As announced in interims earlier this month, the board of the UK equity income trust reached the decision after consulting with major institutional shareholders and considering options such as a continuation vote or accelerated buybacks.

Provided investors give their approval at a forthcoming general meeting, shareholders will be offered two options: roll over into sister fund Premier Miton UK Multi Cap Income, or take a cash exit for up to 100% of their holding.

Founded in 2011 by Gartmore’s star fund manager Gervais Williams, who was later joined by Martin Turner, the now £282m strategy has suffered from its small and micro-cap exposure during a prolonged bear market for UK equities. But despite these headwinds has delivered a resilient net asset value (NAV) total return of 295.5% since inception. This puts it significantly ahead of the 170.2% for its benchmark, the Deutsche Numis All Share index.

Panmure Liberum’s Callum Stokeld noted DIVI’s recent outperformance has come ‘despite the managers facing headwinds’.

 ‘There are tentative signs that price discovery may be improving across UK smaller companies, with more balance to flows and exogenous drivers of value recognition such as activity from industry buyers,’ he said.

A more structural problem has been the trust’s significant shrinkage driven by an annual 100% redemption facility, which was originally designed to protect shareholders. Under the redemption facility the trust has seen its assets severely depleted, most recently losing 30.8% of shares via the policy in August. 

On this, Stokeld noted that maintaining the discount at current levels would likely result in ‘further depletion of the capital base,’ creating a negative feedback loop for investors, especially given the increased liquidity requirements merger and buyback activity has placed on trusts recently. 

DIVI chair Andrew Bell said the board retains ‘a high degree of confidence’ in Williams and Turner, with the rollover option allowing investors to maintain exposure to essentially the same strategy.

One caveat for income seekers highlighted by analysts is that the loss of the closed-ended structure means year-on-year dividend growth may become more variable. The trust is currently a 3.8% yielder.

All going smoothly, the process is expected to complete by the end of the second quarter 2026.