The Majedie Trust had previously held a 26.2% stake in Majedie Asset Management (MAM). However, MAM has agreed to buy back 10% of its share capital for £18m from the investment trust, reducing its stake to 18%. This will be completed by 31 March.
The investment trust will invest the £18m proceeds from the sale in the Majedie UK Income fund. The fund has been managed by Chris Reid since December 2011 and is 7th out of 95 funds in the UK equity income sector over one year, having risen 35.9% compared to an average rise of 22.3%.
Seeding Majedie Asset Management had been a successful investment for the trust and the group had hoped to replicate that success with emerging markets alternative specialist Javelin Capital. The group offered one UCITS fund – the Javelin Capital Emerging Markets Alpha fund. However, the fund raised just £49m in assets and has slid 7.5% over the past 12 months.
The Majedie investment trust said in a statement: "The market for attracting third party funds and the conditions for achieving the required performance have, however, proved to be very challenging since Javelin's launch. Consequently the Board does not now believe that Javelin is likely to attract material third party assets under management in the foreseeable future. The Board has therefore decided to wind down Javelin’s operations and the Company will realise its investment in the Javelin." The proceeds from this wind-down will go into the Majedie Tortoise fund to keep the absolute return allocation for the trust stable.
The Majedie investment trust has £89m in the 'Core Portfolio' that will now be transferred to MAM to be managed as a segregated mandate, designed to replicate the performance of MAM’s UK Equity fund. The Majedie UK Equity fund is currently 42nd out of 257 funds in the UK All Companies sector over three years, having risen 50.1% against a sector average of 34.3%.
The trust has also restructured its dividend policy. It has historically paid one of the highest dividends in the sector, but payments have been made from revenue reserves rather than capital, in the expectation that Javelin Capital would start to contribute. However, the board said it would rebase the annual dividend with a view to moving to a 'sustainable and progressive distribution policy'. It said the Board expects to declare underlying dividends of 7.5p per share in respect of the financial year ending 30 September 2014.
The Majedie Investment trust has long come under pressure to restructure after serial underperformance. It has taken a leap up in performance, rising around 10% over the past month, but remains on a 13% discount to net asset value.