The Abrdn Diversified Income and Growth trust will return approximately £115m to shareholders in the first half of the year as part of its wind-down process.
Its directors launched a review into the trust’s persistent and entrenched discount in June last year, concluding that a wind-down was in shareholder’s best interests.
After some capital is returned to shareholders this year, there is still £107.3m of the company’s private assets that will not mature until between 2024 and 2027, with an additional £81.5m expected to mature between 2029 and 2033.
With 57.7% of the portfolio’s assets held in private markets, shareholders may not see their investment returned entirely until 2029 at the earliest. It has 128 holdings in total, all of which are funds.
The trust underwent a revamp in 2017 (at which time it was called Blackrock Income Strategies), but it did little to improve performance, according to Andrew Courtney, investment analyst at QuotedData. Since then, it is up 6.1% while most IT Flexible Investment trusts have climbed 18.5%.
Courtney said: “It seems like the company has continually found itself stuck in no man’s land as a decade of falling inflation and central bank intervention crushed volatility and reduced markets to one massive momentum trade, removing almost all the benefits traditionally offered by structurally diverse funds such as this.”
Today’s proposal will be presented at the company’s next annual general meeting in February, but Courtney pointed out that it could come at an inopportune time. After years of poor performance and deep discounts, the trust may be closing just as its investment style returns to popularity.
“It provides a timeline for the eventual return of shareholders’ capital, albeit a long one,” Courtney added. “On the plus side, this does leave the door ajar for some positive returns given the impressive performance of some of the longer dated assets in its portfolio.
“However, the timing of its departure could prove to be unfortunate as increased volatility and the return of inflation could yet herald a new dawn for stock pickers, where the benefits of diversified, multi asset portfolios such as Abrdn Diversified Income and Growth’s could shine through once more.”