Gresham House Asset Management has accused a wealthy shareholder trying to oust it as investment manager of the LMS Capital trust of personally benefiting from the alternative arrangement.
Former CEO Robert Rayne, whose family holds 42% of the trust, is seeking to become chairman of the £44.2m trust and bring investment management in house.
LMS Capital was spun out in 2006 from property business London Merchant Securities, founded by Rayne’s father Max in the 1960s and now merged into Derwent London.
Gresham House has received indications that 30% of shareholder capital is in favour of it remaining in place. The board and proxy adviser ISS are recommending shareholders vote against Rayne’s proposal.
Shareholders will decide on the future of the trust’s management at a meeting on 28 November.
Gresham House hit out at the serious governance concerns raised by Rayne’s potential appointment.
Before its appointment, individuals on the LMS Capital trust had been “well rewarded”. Rayne stands to benefit personally from the self-managed proposals, the boutique manager said in the RNS.
Gresham House also pointed out the board would be responsible for taking investment decisions and holding themselves to account under Rayne’s proposals.
LMS Capital underperformed the FTSE All Share by 95% in the 10 years it was led by him and his proposed return spooked markets with the share price dropping 10% when he outlined his intentions at the start of November.
A small, family-controlled vehicle would struggle to gain scale leading to an increased discount and reduced trading liquidity, Gresham House said. It also forecast costs would increase by over £1m under his proposals.
Gresham House had reduced costs by over 50% since taking on the mandate three years ago.
