Donald Adamson says the board is “completely united” as Invesco uses its 16.9% to demand a general meeting whereby shareholders could vote to replace him and management engagement committee chairman Richard Williams.
Hazel Adam and Howard Myles have been put forward as replacements.
The board of the investment trust issued a regulatory filing on Tuesday hitting back at Invesco’s requisition and highlighting the progress made in finding a new manager to run the fixed income mandate. Adamson said Invesco was welcome to participate in that process, but had so far declined.
Four investment managers have been shortlisted with, including one already managing fixed income assets totaling $370bn.
In an interview with Portfolio Adviser, Adamson said: “Invesco resigned and then by issuing this requisition they tried to put people off responding to our requests. That failed because people did respond, household names responded and a lot of them did.
“The only way to interpret this is that they were trying to deal themselves back into the game and disadvantage the company from finding better terms.”
Invesco is joined by Practical Investment Fund and GAM Star Credit Opportunities, which hold 2% and 8% respectively, in the requisition.
Invesco has said it is not commenting on the case. It would not respond to any of Adamson’s comments when contacted by Portfolio Adviser.
Brewin sides with board
Brewin Dolphin came out on Tuesday against Invesco.
“We can find no justification for Invesco’s decision to abandon those negotiations, and subsequently use its status as the largest aggregate holder of shares (on behalf of its clients) to seek the removal of two of the directors,” said Brewin head of research Guy Foster.
“We cannot support the removal of board members under such circumstances and would urge parties to return to good faith negotiations or otherwise leave the board to continue working to reduce fees and shore up the uncovered distribution for the benefit of shareholders.”
Brewin holds a 2.5% stake in the investment trust worth around £3m.
Portfolio Adviser understands the wealth manager had discussed concerns about fees with the board before the current fracas became public.
Retail shareholders
Adamson said the requisition represented a “cynical” effort to use concentrated voting power to achieve an outcome in its own best interests.
He said Inveso is counting on retail shareholders invested through platforms and wealth managers not voting their shares.
“What [Invesco] is relying on is that retail shareholders have a lower turnout in company elections that they will therefore carry the day on board composition. We think that’s wholly against the interests of shareholders and we’re going to make sure shareholders are fully informed of the facts,” he said.
Invesco’s conflict policy includes a principle to respect the primacy of client interests, Adamson noted. “We are struggling to see how their conduct in consistent with that principle.”
“We’re a small company with an independent board what we’re facing is a self-interested onslaught from a very big and powerful group. That group is ignoring contemporary standards of corporate governance.”
Invesco stake
A 16.9% stake held by Invesco funds means that there is likely to be a significant share overhang if the fund moves to another group, Numis said in a note issued on Tuesday, shortly after the board filed its regulatory notice.
Adamson said Invesco’s stake had not been an issue in the past, but they were now seeking to “weaponise” their stake.
“The board is the only thing between the end investor and the rapacity of Invesco,” Adamson said.
Jilted broker
In December, the investment trust board replaced Panmure Gordon as its broker, appointing JP Morgan Cazenove instead. A regulatory filing published at the time of the change provided no rationale for the move, but Portfolio Adviser understands the latter was offering a cheaper service.
Panmure Gordon is coordinating the requisition that would see the two directors on the five-person board removed.
Portfolio Adviser understands three other shareholders plan to vote in line with Invesco, although at least one shareholder has raised concerns the investment trust would lose its fixed income expertise if Williams was ousted.
Williams is the chief investment officer at Railpen and has managed global fixed income portfolios on behalf of the £28bn pension scheme.
He has a key role in picking the next manager for the investment trust.
Strong performance
Despite Adamson’s scathing view on Invesco’s conduct, the fixed income team managing the trust have delivered strong performance.
Numis stated in an analyst note published on Tuesday the trust has had a good track record in recent years. “We believe that investors had been supportive of the existing management team,” it said.
It stated the fund’s premium to NAV had contracted from around 9% to 1.6% since the fallout over fees had blown up.
Chelsea Financial Services managing director Darius McDermott said: “Normally it’s boards who fire poor fund managers, normally for poor performance. I don’t think there is any question performance from the trust has been good net of fees.”
McDermott added: “At a time when most investment trusts are lowering their fees and removing performance fees, Invesco was trying to keep a hold of that. In saying that, the performance of the trust is perhaps enough to justify those fees.”
