Nippon Active Value Fund (NAVF ) is rapidly becoming the consolidation vehicle of its sector as the top-performing Japan investment trust agrees to absorb rival Atlantis Japan Growth (AJG ), just three months after announcing a merger with Abrdn Japan (AJIT ).

Faced with losing a continuation vote at this month’s annual general meeting of shareholders, Atlantis Japan Growth, a sub-scale smaller companies fund badly hit in the growth selloff, has concluded it should wind up and roll its assets into NAVF.

Shareholders will get the chance to take out a quarter of their money at a 2% discount to asset value before the merger proceeds.

Its shares jumped 5.7% to 171p at the news.

The decision brings AJG to an end after 27 years after it was launched by leading Japan manager Ed Merner who founded its fund manager Atlantis Investment Research Corporation after leaving Schroders, and who died last year.

Since 2016 the investment company has been run by Taeko Setaishi but despite good initial underlying performance it had struggled to attract investors and grow.

With net assets of just £77m, AJG is the smallest of the 11 Japan closed-end funds listed on the London Stock Exchange. With its shares trailing on a 14% discount it had a market value of only £66m and had left shareholders sitting on a total loss including dividends of 12% over five years. Over 10 years, it delivered a 65% total return well below the 109% from the Topix Small Cap index.

Noel Lamb, chair of Atlantis Japan Growth, said: ‘Style rotation, recent poor performance and reduced liquidity have led the board to review alternative options and take market soundings. The investment adviser, Atlantis Investment Research Corporation has given the fund great service over many years. Looking ahead, this proposal to rollover into Nippon Active Value Fund with an option for a 25% cash exit, will provide investors with increased liquidity and access to a manager with a proven record. I commend it to our shareholders’

Rising Sun, the manager of NAVF, will contribute £800,000 towards AJG’s costs.

Separately, NAVF, a £165m top-performing activist smaller companies fund that leads its sector with a three-year shareholder return of 58%, said its merger with the £84m AJIT was at an advanced stage with formal documentation due to be published next month.

It said the combination with AJG would give it more assets at a timely point when corporate governance reforms in Japan are making its job easier and providing more investment opportunities.

Winterflood analyst Emma Bird said AJG’s decision was another good example of board independence in the investment company arena. ‘Today’s events are further evidence of this dynamic, offering the prospect that the sector may emerge stronger and more liquid out of its current predicament, with capital gravitating to managers with the strongest track record.’