A £344m investment trust that never fully recovered from the collapse of Neil Woodford, one of its largest former investors, is to merge with its investment manager, Pollen Street Capital Holdings, to become a commercial company.
The Honeycomb Investment Trust, which launched in December 2015, consistently traded at a premium before the suspension of the Woodford Equity Income fund in June 2019. It invests in alternative finance and currently sits in the AIC Direct Lending sector.
That year, the investment trust delivered an NAV return of 7.8% but shareholders faced a loss of 7.34%, according to FE Fundinfo, as the share price dropped from an 11.3% premium to a 4.2% discount. At the end of the year, Link Fund Solutions, the administrator of Woodford’s former fund, held 17.77% of the trust, compared to the 21.84% held by Woodford Investment Management a year earlier.
Mark Barnett was also a large investor and Invesco held 36.17% of the trust at the end of 2018, although the trust noted the composition of the share register had changed “materially” by early 2020. It described this as an important strategic development and said it removed the overhang “associated with shareholders with liquidity pressure”.
Despite steady NAV returns, even during the worst of the Covid-19 pandemic, the investment trust’s share price has never fully recovered.
In a regulatory filing on Tuesday morning, Honeycomb announced its planned merger with Pollen Street, meaning its life as an investment trust will come to end. Irrevocable undertakings representing 50.4% of share capital, including Quilter Investors and people associated with Pollen Street and the trust, have already said they will support the merger. Additionally, M&G Investments has provided a letter of intent to vote in favour, representing 6% of share capital.
The combined entity will then run as an alternatives asset manager with approximately £3bn of funds coming from Pollen Street and a further £600m coming from Honeycomb. Pollen Street forecasts AUM could reach £5bn in the medium term.
The investment trust currently trades at a 6% discount with a dividend yield of 8.27%.
