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Trusts being exposed to Darwinism is good for investors

Trusts being exposed to Darwinism is good for investors
March 8, 2023
Trusts being exposed to Darwinism is good for investors

A fund dedicated to all things investment trusts has arrived at a crossroads. Migo Opportunities (MIGO), a closed-ended fund that buys investment trust shares, has served six months’ protective notice on investment manager Premier Miton. The decision, prompted by the resignation of Premier Miton employee (and MIGO lead portfolio manager) Nick Greenwood, will see the board think about who should run its investments in future.

It’s worth noting that MIGO will pretty much stick to its knitting in many respects. Greenwood will stay involved with the portfolio until 2024. The options being reviewed by the trust’s board will include a proposal from Premier Miton, and the investment strategy is itself not expected to change. But it’s interesting to see that trusts operating in more niche corners of the investment universe are still exposed to the disruptions – and sometimes an element of Darwinism – that we might more readily associate with more mainstream funds.

Let me give a few examples. Aquila Energy Efficiency (AEET) recently failed a continuation vote, meaning that by 28 August the board must “recommend to shareholders whether the company be reconstructed, reorganised or placed into liquidation, having explored all options and determined the best solution including discussing the options with the company’s shareholders”.

Another renewables play, which in fact launched just a few years ago, US Solar (USF), announced in October last year that it was conducting a strategic review. As the board noted at the time, “structural challenges in the US solar sector alongside a recent sustained discount of the share price to net asset value have impeded the company’s ability to grow its asset base”. The review, the results of which were still expected in the first quarter of this year at the time of writing, could include a full sale of the trust’s share capital, with funds being returned to shareholders or alternatively a change in the trust’s investment management arrangements.

Other changes are also afoot. International Biotechnology (IBT) recently announced that its investment manager SV Health wants to focus on its core healthcare venture business, prompting a review of the trust’s options – although the joint lead fund managers have expressed a willingness to continue in this role in a different capacity. Elsewhere, Digital 9 Infrastructure (DGI9) announced in November that it had appointed new personnel at the helm of its portfolio after the old managers left “to pursue other career opportunities”. Alternative asset managers are also subject to acquisitions as traditional players look to establish more of a foothold in new areas – think of Schroders taking a majority stake in renewable infrastructure specialist Greencoat, for one.

Investors are certainly used to upheaval in the funds space – portfolios close, investment managers change and sometimes a strategy will shift. But what’s interesting is we might be seeing such changes heat up in the alternative asset space. Areas such as infrastructure are now extremely popular – meaning there is competition for the best talent, but also that funds will have to sink or swim given how many rivals there are. That could mean continued due diligence is required on funds operating in seemingly sedate asset classes such as infrastructure. But it also means that only the best funds can successfully compete for a space in your portfolio.