The proposed end to the £590.7m Scottish Investment Trust has been called a “sad day” for nostalgists as the board calls for the merger of one of the UK’s oldest investment companies with JP Morgan Global Growth & Income, another stalwart in the sector.
The investment trust sits in the AIC Global sector and is fourth quartile over three and five years, returning shareholders 1.7% and 19.4% respectively over those periods, while the sector has returned 39.7% and 83.3%, according to Trustnet. Over the same periods, the £505m JP Morgan Global Growth & Income trust has returned 64.6% and 109.3%. It sits in the Global Equity Income sector.
Lead manager Alasdair McKinnon (pictured), a veteran of the investment trust sector, and his investment team do not run any other money and a regulatory filing said the Edinburgh address from which they run the portfolio would be sold. McKinnon joined the team in 2003 and became lead manager in 2015.
‘A sad day for some investment trust nostalgists’
“This might be a sad day for some investment trust nostalgists but for others it demonstrates the Darwinian power of the investment trust structure,” said Killik head of managed portfolio services Mick Gilligan.
Both the Scottish Investment Trust and the JP Morgan Global Growth & Income were founded in 1887. The JP Morgan trust is the seventh oldest in the UK, having been founded in April of that year, just three months before the Scottish Investment Trust.
The UK’s oldest investment companies
| Company | Management group | AIC sector | Total assets (£m) | Launch date |
| F&C Investment Trust | BMO Global Asset Management | Global | 5,599.67 | 19/03/1868 |
| Investment Company | Fiske | Flexible Investment | 16.23 | 14/11/1868 |
| Dunedin Income Growth | abrdn | UK Equity Income | 527.41 | 01/02/1873 |
| Scottish American | Baillie Gifford | Global Equity Income | 952.23 | 31/03/1873 |
| JPMorgan American | J.P. Morgan Asset Management | North America | 1,482.50 | 18/06/1881 |
| Mercantile | J.P. Morgan Asset Management | UK All Companies | 2,813.12 | 08/12/1884 |
| JPMorgan Global Growth & Income | J.P. Morgan Asset Management | Global Equity Income | 729.64 | 21/04/1887 |
| Scottish Investment Trust | Scottish Investment Trust | Global | 670.84 | 27/07/1887 |
| Henderson Smaller Companies | Janus Henderson Investors | UK Smaller Companies | 1,110.92 | 16/12/1887 |
| Bankers | Janus Henderson Investors | Global | 1,692.39 | 13/04/1888 |
Source: AIC/Morningstar as at 30 September 2021
How the board expects shareholders to benefit from the switch
Performance in the Scottish Investment Trust had taken a hit due to its value and UK bias, said Gilligan.
The style-agnostic approach of the JP Morgan team was praised by the investment trust’s board in the RNS explaining its rationale for merging the portfolios.
“One big risk with the announced change is if we see a strong resurgence in value and gold mining stocks,” said Gilligan. “However, the new managers have scope to take advantage of such a rotation. This would be a strong test of the new management’s credentials.”
He said in the open-ended world, an Oeic facing similar issues “could quite easily limp on for years”.
The board said JP Morgan Asset Management’s in-house resource would benefit shareholders. The investment team of Helge Skibeli, Rajesh Tanna and Tim Woodhouse is supported by 80 analysts globally. The funds giant manages 20 investment companies with assets over £12.5bn.
Additionally, a new fee arrangement has been agreed with JPMAM meaning shareholders would enjoy a forecast ongoing charge of 0.57% over the next 12 months on the back of an initial weighted average AMC of 0.49% of net assets.
Together, the two portfolios would also benefit from economies of scale, something Numis approved of in an analyst note published on Wednesday morning. “We have been calling for more consolidation in the sector and this combination plays to that theme, leading to a vehicle with significant scale, assets of over £1.2bn, and represents a bolder decision from the board that simply appointing another manager.”
One of the last self-managed investment trusts
QuotedData head of investment companies James Carthew noted the deal removes one of the last few remaining self-managed trusts from the sector.
“These used to be more common, but over time boards realised that external managers were often better-resourced and there were less headaches (including rows over pay) if they did not have employees.”
Witan, RIT and Caledonia are among some of the notable investment trusts in the sector that still take this approach.
McKinnon is joined by four investment professionals in his team with his deputy, Martin Robinson, having joined in 2004, while Mark Dobbie has served more than two decades with the Scottish company, having joined in 2000.
Under the proposed merger, Scottish Investment Trust’s pension scheme and its wholly-owned subsidiary SIT Savings would remain with the liquidators, alongside its offices in Edinburgh, which would be sold off. Scottish Investment Trust shareholders would receive any excess funds once all liabilities had been settled.
