Acorn Income has made a stunning reversal and dropped BMO Gam as its manager, months after selecting the firm to helm a radical transformation at the trust.
Back in May the fund group was named as the heir apparent to succeed existing managers Premier Miton and Unicorn Asset Management and revive the floundering trust, which had been struggling to grow assets.
Global equities manager Sacha El Khoury (pictured) had been slated to run the £69m trust, which was to abandon its UK smaller companies focus and be repositioned as a global sustainable income vehicle.
Shareholders had been due to weigh in on the proposals this month at the company’s AGM where the trust was also scheduled to be put to a five-yearly discontinuation vote.
Board decides on ‘alternative proposal’
But on Thursday, the board pulled the rug out from under BMO Gam and said that, after weighing up its options, it had decided to go in another direction.
Since announcing BMO Gam would take over, the board said it had received “further interest from managers regarding the future of the company”.
“Despite the board continuing to believe that the BMO proposal is an attractive investment proposition, after careful consideration of shareholder feedback the board has concluded that an alternative proposal to the BMO proposal may represent a more suitable proposition for the company’s shareholders,” it said in an RNS filing.
As such, the board said the AGM would be postponed and promised further details on the future of the trust by no later than mid-September.
Shares in the trust took off as markets digested the news and were trading 4% higher at 365p by mid-morning.
Commentators had questioned ‘odd timing’ of appointment
Acorn Income’s radical change in direction had raised some eyebrows.
At the time AJ Bell head of active portfolios Ryan Hughes noted the decision to transform the trust into an ESG-focused vehicle might not go down well with certain shareholders as it was “very different” from the fund they initially invested in.
Though demand for ESG products has been red hot among retail investors in the open-ended space, it is unclear whether appetite is as strong among closed-ended investors.
Liontrust failed to get its ESG Trust off the ground last month, despite its sustainable team’s strong track record and the IPO being highly publicised.
See also: Scrapped Liontrust ESG Trust launch reflects challenging environment for fund raisings
Fairview Investing founder and consultant Ben Yearsley highlighted the “odd timing” of the appointment right after the business had been sold to Columbia Threadneedle.
He said it’s possible this might have swayed the board’s decision.
“With any merger/takeover there will always be some fallout on the fund management side with managers leaving, therefore it was an odd time to switch especially as Unicorn and Premier have got some great managers”.
See also: Acorn Income questioned for ‘odd timing’ of BMO Gam appointment after Columbia Threadneedle takeover
Bmo Gam claps back at board’s failure to consult significant shareholders
BMO Gam said it was “extremely disappointed” by the board’s decision which “creates continued uncertainty for the company’s shareholders”.
“Despite running a ‘lengthy and extensive’ strategic review, which led to the receipt of ‘strong interest from a number of high-quality managers’ and the recommended appointment of BMO Gam to manage the company, it is clear that the board’s failure to consult significant shareholders at the time – including the incumbent manager – has resulted in the board misjudging some shareholder views over the future direction of the company,” the fund group said.
BMO Gam also lamented the fact the trust’s full shareholder base was unable to vote on the board’s initial recommended proposal.
“As a leading manager of investment trusts with a proven track record of ESG investing, our proposal met the growing institutional and retail investor demand for investments that make a positive long-term environmental and societal impact.”
