Shares in Abrdn Latin American Income (ALAI ) have shot up nearly 8% after the board of the £31m investment announced it would liquidate and return cash to shareholders.

In a statement, the trust’s chairman Howard Myles said: ‘While the board believes that the company’s strategy remains attractive in the longer term, it is aware that the company’s small size makes it difficult to attract significant demand for its shares and that the discount at which the shares trade to net asset value is likely to persist.’ 

The shares jumped 4.25p, or 7.8%, to 59p, removing most of the longstanding 11% discount between the price and their underlying net asset value (NAV).

The company said it had considered the views of its largest shareholder, discount-hunting City of London Investment Management, which owns a 20% stake, and its professional advisors, which include broker Singer Capital Markets.

The board is recommending that shareholders approve the windup and sale of the trust’s assets at an extraordinary general meeting. It anticipates the company will be placed into summary winding up at the end of May.

The decision to terminate a small closed-end fund that has left shareholders with a 17% loss over 10 years is not a surprise. Corporate actions have stepped up of late as boards and investors respond to the widening in investment company share price discounts in last year’s crash. Last month, stablemate Abrdn Smaller Companies Income (ASCI ) announced it was seeking a merger partner having concluded it was too small to continue.

There may be questions why the board did not seek a merger with its only direct rival, the £103m BlackRock Latin American (BRLA ), which itself could do with bulking up if it is to survive long-term. 

Launched 22 years ago, ALAI is managed by Brunella Isper and Viktor Szabo at Abrdn who have overseen a 29.8% shareholder return over three years, below the 36.8% from the MSCI Latin America index.

Abrdn remains a leading investment trust provider with 20 other London-listed closed-end funds in its stable, such as the £1.6bn Murray International (MYI ), the more recently launched Abrdn European Logistics Income (ASLI ), and the £380m Abrdn UK Smaller Companies Growth (AUSC ) which it gained as part of its 2017 merger with Standard Life.