Rathbones has declared it owns more than 5% of the shares in 48 investment trusts following its merger with Investec Wealth & Investments, including five mammoth holdings where it controls over 20% of issued share capital.

The combination of the two wealth managers completed on 21 September and while the importance of the merger for the investment company industry has been well flagged, the true extent has only now come to light.

In line with regulation, Rathbones issued a plethora of stock exchange notices in the days following the merger, notifying the market that its stakes in trusts had gone above 5%. Of the 48 trusts notified, 25 of the stakes were more than 10%.

The biggest question mark following the merger is what will happen to BH Macro (BHMG ), in which the group had a stake of just over 30% following the merger, the threshold which would ordinarily require a bid to be made under Takeover Panel rules.

While the panel will waive that requirement for a company that finds itself with a large stake in another company after a merger, it is understood that Rathbones and Investec would have been restricted from buying more shares.

According to Regulatory News Service statements, Rathbones had been steadily divesting some of its stake before the merger and has continued the process in recent days. On 21 September its stake stood at 30,2% but had fallen to 28.9% by 2 November.

Rathbones’ largest trust holdings

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Trust	Stake after merger	Market cap	Continuation vote
BH Macro (BHMG )	30%	£1.37bn	None
Warehouse Reit (WHR )	24%	£342m	None
Aquila Energy Efficiency (AEET )	22.9%	£56m	2025
Pantheon Infrastructure (PIN )	22.8%	£1.42bn	2027
Polar Capital Global Financials (PCFT )	21%	£417m	May-25
Polar Capital Global Healthcare (PCGH )	19.3%	£359m	Jan-25
Miton UK Microcap (MINI )	19.2%	£37m	None
Life Science REIT (LABS )	17.7%	£237m	May-28
Picton Property (PCTN )	17.4%	£349m	None
Schroder Real Estate (SREI )	16.8%	£205m	None
International Public Private (INPP )	15.4%	£2.38bn	None
Herald (HRI )	15.4%	£974m	Apr-25
Schroder Oriental Income (SOI )	15.1%	£613m	None
Polar Capital Global Technologies (PCT )	14.9%	£2.81bn	Sep-25
UK Commercial Property (UKCM )	14.1%	£737m	Apr-27
SDCL Energy Efficiency Income (SEIT)	13%	£678m	None
JPMorgan Global Emerging Markets (JEMI)	12.7%	£362m	Nov-24
Schroder Asia Pacific (SDP)	12.1%	£838m	Jan-26
GCP Infrastructure Investments (GCP)	12%	£551m	None
HydrogenOne Capital Growth (HGEN)	11.5%	£58m	May-26
Schroder Asian Total Return (ATR)	11.4%	£398m	May-25
Murray International (MYI)	10.9%	£1.46bn	None
Bankers (BNKR)	10.8%	£1.21bn	None
Baillie Gifford Japan (BGFD)	10.3%	£680m	None
Keystone Positive Change (KPC)	10.3%	£120m	None

 Source: Citywire, Numis

Markuz Jaffe, analyst at Peel Hunt, said his biggest concern was where an investment company is seen as ‘subscale and not offering sufficient liquidity for significant existing investors’.

There is a growing consensus around the industry that £500m is the new minimum market capitalisation for wealth managers, rising from £200m, which was the perceived limit in years gone by.

Of the 25 holdings where Rathbones has more than 10%, 12 have a market cap of less than £500m.

The combined entity’s substantial stakes also make it a powerful mover in upcoming corporate action, including mergers and continuation votes. Rathbones has stakes in both Picton Property (PCTN ) and UK Commercial Property (UKCM ), which have teased the stock market by acknowledging rumours of merger talks.

It also has stakes in several trusts involved in continuation votes, including Brown Advisory US Smaller Companies (BASC ), which passed its vote with a 90% approval rating earlier this month.

Smaller holdings with upcoming continuation votes

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Trust	Stake after merger	Market cap	Continuation vote
River & Mercantile Micro Cap (RMMC )	9.1%	£46m	Feb-24
Templeton Emerging (TEM )	8.6%	£1.7bn	Jul-24
Abrdn European Logistics (ASLI )	7.3%	£228m	Jun-24
Blackrock World Mining (BRWM )	6.7%	£1.1bn	Apr-24
Fidelity European (FEV )	5.9%	£806m	May-25
Apax Global Alpha (APAX )	5.8%	£815m	May-24
NextEnergy Solar (NESF )	5.8%	£250m	Aug-24
HGCapital (HGT )	5.4%	£1.8bn	May-26
Chrysalis Investments (CHRY )	5.2%	£411m	Apr-24
Odyssean (OIT )	5.2%	£182m	Sep-25
Henderson Far East Income (HFEL )	5%	£338m	Jan-24

Source: Citywire, Numis

Next year, Rathbones’ power will become even more apparent as eight of the trusts face a continuation vote.

A spokesperson for the combined business said it was ‘monitoring’ the holdings ‘closely’.

‘We are in regular discussion with the companies in which we are invested, and relevant regulatory bodies where necessary, to ensure we meet all regulatory requirements and continue to act as responsible investors,’ they said. ‘Ultimately, we make investment decisions to support strong client outcomes and we will continue to keep that focus.’

Industry take

The industry does not anticipate any substantial selloff from the combined entity as a result of the merger. However, some corners are warning the sector needs to adapt to a world where large wealth managers do not participate.

Ewan Lovett-Turner, head of investment companies at Deutsche Numis, said there will not be a ‘cliff edge’ issue where Rathbones aggressively ditches shares but there could be ‘some reluctance to add’ to positions.

‘I don’t expect it to actively sell based on any arbitrary company-wide limit,’ he said. ‘It is not really possible to justify it being in the best interest of individual clients.’

However, Nick Greenwood, manager of Miton Opportunities Trust (MIGO ), which invests in other investment trusts, said he could see a situation where Rathbones sells some of its positions to an activist, such as Saba.

By and large, he expects a steady withdrawal from most of the holdings, except the ones topping the list ‘where they might have to come up with some kind of solution’.

In the long term, he envisages an investment companies sector without Rathbones. 

‘They will slowly and surely be less involved in the sector as time goes by,’ he said. ‘Eventually, they won’t hold investment companies at all as the size of the pot is just so large.’