Investors representing 46% of the share capital of CQS Natural Resources Growth & Income (CYN ) have elected to tender their shares, leaving analysts concerned that the trust will become subscale. 

The tender offer, for up to 100% of shares, was announced in May as part of a package of ‘value enhancing’ initiatives, including a fee reduction and enhanced dividend policy.

At this point, a ‘standstill agreement’ was also announced with US activist investor Saba Capital until 2028. For this period, Saba has agreed it will not requisition the board to convene another general meeting or propose the removal of any board member. 

At the time, New York-based Saba confirmed it would tender its full holding. It was the largest shareholder in the trust with a 29% stake (including derivatives). 

Total redemptions are below the 60% limit that would have resulted in the trust winding up, but will shrink net assets to around £74m. 

Deutsche Numis analyst Ewan Lovett-Turner warned that the trust will no longer be on investors’ radar on account of its smaller size.

‘As a result, we believe the long-term future remains in doubt, and the fund is likely to remain a niche offering,’ he said. 

But on a more positive note, Lovett-Turner said the trust faces ‘less pressure’ from Saba now it has tendered all of its stake. 

Saba first requisitioned the board in December 2024, looking to appoint itself as the manager. In February, shareholders voted against this plan. 

Its next step was to requisition another extraordinary general meeting for shareholders to vote on proposals to transition the trust into an open-ended fund. This plans was put on hold in early March while the board completed a strategic review. 

To protect shareholders who remain invested, shares will be liquidated via the creation of a ‘tender pool’. The pool is expected to be realised for cash and liabilities by September. 

Remaining parties will also benefit from the fee reduction and enhanced dividend policy which were announced earlier this year.

CYN’s chair Christopher Casey commented: ‘While the company is now smaller in size, its focus on natural resources and the measures we have taken to appeal to existing and new investors give us a clear, uninterrupted pathway to grow the company.’

CYN, which invests in mining and natural resources shares and bonds, currently yields 5.9%. Prior to the tender offer, it traded at a 5.9% discount.

Over the past three years, its shares are up 27.7% which compares to an 11.6% gain by the average trust in the AIC’s commodities and natural resources sector.