Long before activists such as Saba Capital appeared on the scene, UK investment trusts were already thinking of ways to improve shareholder returns.

Take Strategic Equity Capital [SEC), which since 2020 has been owned by Gresham House and managed by Ken Wotton and his team.

Back in February 2022, the trust’s board announced a series of proposals designed to improve value creation and strengthen SEC’s investment proposition.

One of the proposals was to scrap the continuation resolutions which would have come up in the 2022, 2023 and 2024 AGMs in favour of a 100% ‘realisation’ event in 2025.

Having considered the options, the board and the management team have opted for a tender offer which allows investors who want to exit the trust the opportunity to do so while keeping it open to those who want to remain.

Shareholders will be asked to vote on a special resolution to allow the trust to buy back shares, after which the assets will be managed as a Continuing Pool and a Tender Pool, with the capital from the Tender Pool being returned over the following months.

Gresham House, which now owns 17% of the shares compared with 5.4% in February 2022, is not selling, arguing in favour of SEC’s track record and the team’s ability to continue generating value for shareholders.

In fairness, since Wotton’s appointment as lead manager in September 2020 the trust’s NAV return per share has been 75% while the share price return has been 102%.

By comparison, the FTSE Small-Cap index excluding investment trusts has returned 84% and the UK Smaller Companies trust sector has returned 65% over the same period.

Shareholders wanting to take advantage of the tender should note that given the trust invests in smaller companies, which are generally less liquid than larger ones, it may take some time to realise their investments, and tendered shares could be held in escrow for up to 12 months or more.

Another trust deciding on its future is Murray Income (MUT), managed by Charles Luke and the team from Aberdeen Asset Management, which invests in ‘quality companies’.

As part of a review begun in July this year, the board is considering proposals from outside managers as well as Aberdeen on how to deliver improved performance.

Over the year to the end of June, the NAV total return was 2.7% and the share price total return was 4.3% compared with 11.2% for the FTSE All Share total return index, meaning the trust has now lagged the index over one, three, five and 10 years. 

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