The shake-out in the investment trust space continues with one fund announcing today it would liquidate its assets and return cash to shareholders and another opting for a strategic review to determine its future.

Shares in both trusts jumped on the news, but the likelihood is both will end up exiting the market leaving investors with the quandary of where to put their money next.

Expect 2024 to see more mergers of sub-scale investment trusts

FOLDING ITS TENT

Alongside its results for the six months to September, Triple Point Energy Transition (TENT) – which invests in energy infrastructure assets such as battery storage, CHP (combined heat and power) projects, and hydro-electric and solar power generation – announced it would carry out ‘an orderly realization of assets and return of associated capital’ just three years after coming to the stock market.

The company said that despite making progress towards its goals of generating predictable long-term cash-flows and targeting total NAV (net asset value) returns of 7% to 8% once fully invested, it had been ‘significantly impacted by the wider macro-environmental pressures being experienced by a large number of its sector peers’.

‘This, alongside sub-optimal liquidity, has contributed to the company's shares trading at a persistent discount to the Group's prevailing net asset value since January 2022, which in turn has restricted the company's ability to raise further capital and realise the benefits that come from greater scale.’

With an NAV per share of 95p at the end of September the shares were trading at just 57p before today’s news or a discount of 40%, and even with the benefit of a 13% bounce they are still only trading at 65p today.

Major shareholders include Aviva Investors, East Riding Council and funds managed by Liontrust (LIO) and Schroders (SDR).

CONSIDERING ITS OPTIONS

Meanwhile, following an unsuccessful attempt to merge with sister fund GCP Infrastructure (GCP) in September, GCP Asset Backed Income (GABI) revealed it would begin a strategic review to consider ‘how it may best deliver value to shareholders’ given the discount to NAV, the illiquidity of its shares and the limited scope for the company to grow.

Key shareholders, including Valu-Trac, CCLA, Waverton and West Yorkshire Pension Fund, will be asked early in the new year for their feedback on the following options:

- some form of consolidation, combination, merger or comparable corporate action

- selling the entire issued share capital of the company

- selling all or substantially all the assets of the company

- a continuation of the company under its current investment policy, alongside potential cash exit opportunities for shareholders, including as a one-off event and/or at regular intervals and which may be conducted by way of one or more share repurchases, tender offers and/or the creation of a new realisation share class which would return capital to holders of those shares as investments are realised over time

- an orderly wind-down of the company

What shareholders may not appreciate is the fact in October a US-listed investment company made an offer to buy the entire trust at 68p per share in cash, with an option to take shares in the acquirer instead for a value of 76p per share, which the board unanimously rejected.

The same bidder increased their terms to 72p cash and 78p for the share alternative in November, but then pulled both offers two days ago when the shares were trading below 60p, possibly prompting today’s announcement.

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