A total of 60.75% of the investment trust’s issued share capital took up the offer, which has now been cancelled. Abiding by the offer would see the remaining assets in the trust fall to £48m. Currently its assets sit at £123.1m.
Instead the board will put forward revised proposals to shareholders, including full cash exit at net asset value (NAV) less applicable costs.
The board is not commenting on alternative proposals, but Portfolio Adviser understands one option for investors who do not want to redeem their shares could be to merge into another Blackrock product.
Sam Vecht (pictured), who co-manages the trust with Chris Colunga, also runs the €910.6m Blackrock GF Emerging Europe D2 Sicav.
Colunga supports Vecht on the Sicav, which has a similar process to the investment trust and is available on some UK platforms.
In the investment trust space, Vecht runs the £304m Frontiers trust and the £312.5m Greater Europe trust, which is mostly focused on developed economies.
In light of the offer, Neil England will extend his chairmanship of the board until alternative proposals are approved by shareholders or when the company enters liquidation, presuming that’s what shareholders vote for.
His currently tenure was due to finish on 20 June 2018.
Russian sentiment
Tilney managing director Jason Hollands said participation in the tender offer appeared to be much higher than the board expected.
“The trust is already quite a small vehicle and given the specialist focus and I suspect has a fairly concentrated shareholder base. In the current environment, where Russia is under sanctions, demand for a portfolio heavily skewed to Russian equities is likely to be low,” Hollands said.
In April, following news of further US sanctions against Russia, Vecht defended the macroeconomic stewardship of the country.
The investment trust currently holds 54% in Russia.
Baring Emerging Europe will now be the sole investment trust in the Europe Emerging Markets sector. Managed by Matthias Siller, the £94m investment trust has underperformed Blackrock Emerging Europe.
Discount narrows
England said in a statement: “We fully understand that following these very strong absolute and relative returns, many shareholders have opted to take profits on their positions. It is their decision as to where they choose to invest their money and they should be free to seek out the most promising investment opportunities, wherever they are to be found.”
When Portfolio Adviser first reported on the tender offer in May, the investment trust’s discount was 4.7%, but that has narrowed to 1.4%, according to the Association of Investment Companies.
England said since Blackrock took over the mandate in 2009 it has returned double the reference index since with shares rising 140%.
‘’The board of Blackrock Emerging Europe have always recognised its role is to act in the best interests of our shareholders. We have regularly consulted with our major shareholders to understand their objectives and used their input to guide our strategy and policies.
“Our strategy has allowed our well-regarded investment managers to take conviction based positions and be able to invest with confidence for a fixed period of time.”
| 6m | 1yr | 3yr | 5yr | |
| Blackrock Emerging Europe | 1.22 | 5.14 | 65.09 | 45.38 |
| Investment Trust European Emerging Markets | -3.79 | 2.24 | 58.85 | 28.45 |
| MSCI Emerging Markets Europe 10/40 | -4.82 | 0.34 | 30.21 | 2.70 |
