The board of the Scottish Investment Trust has warned shareholders they face a prolonged merger with JP Morgan Global Growth & Income due to the self-managed nature of the investment trust.
In October, the board announced plans to merge the global equities investment trusts into a £1.5bn portfolio to be managed by the team behind the JP Morgan Global Growth & Income investment trust.
The announcement immediately led to a narrowing of the discount with the contrarian approach of the Scottish Investment Trust delivering poor performance for a number of years, while the JP Morgan Global Growth & Income portfolio has consistently outperformed its MSCI ACWI benchmark. The £702m Scottish Investment Trust portfolio currently trades at a discount of 5.4% compared to a 10.1% average discount over the last 12 months, according to Hargreaves Lansdown data.
Today the board announced the publication of the circular, detailing exactly how the merger will take place, and set a date for shareholders to vote on the proposals.
Scottish Investment Trust vs JPM Global Growth & Income performance
| 6m | 1yr | 3yr | 5yr | |
| Scottish Investment Trust | 7.86 | 20.10 | 15.34 | 35.97 |
| JPMorgan Global Growth & Income plc | 13.63 | 26.74 | 69.86 | 119.18 |
| MSCI ACWI | 14.68 | 24.55 | 56.32 | 86.90 |
Source: FE Fundinfo
See also: ‘Sad day’ as board seeks end to historic £600m Scottish Investment Trust
Self-managed investment trust has loose ends to be tied up
Lead manager Alasdair McKinnon (pictured), a veteran of the investment trust sector, and his investment team do not run any other money and were employed by the Scottish Investment Trust itself rather than an asset manager as part of the increasingly rare self-managed investment trust model.
That self-managed arrangement is what is now going to cause delays to the merger of the investment trusts, the board of the Scottish Investment Trust warned in today’s regulatory filing. Matters such as the company’s pension scheme need to be addressed before the transaction merging the trusts can go ahead, the board explained.
“It is anticipated that it may be a number of months before the transaction can formally proceed, due to the additional complexities inherent in a self-managed investment vehicle such as the company,” the board said.
As a result, it is proposing the merger take place in two stages: initially, JP Morgan Funds will take over as investment manager and position the portfolio in line with the JP Morgan Global Growth & Income portfolio; finally, once the investment trust has “taken all steps necessary to allow it to be placed into liquidation in an orderly fashion” the merging of the two portfolios and the investment companies will take place.
If shareholders approve the merger, JPM is expected to takeover management of the portfolio “on or around” 21 January 2022, while the completion of the merger is set to take place by the end of Q1 2022.
Shareholders will have a chance to vote on the proposals on 9 December.
Although self-managed investment trusts are becoming increasingly rare, EP Global Opportunities, run by Sandy Nairn, announced proposals last month to adopt the model. There are currently just 13 investment trusts in the Association of Investment Companies universe that adopt the model, according to Morningstar data compiled by the trade body.
See also: What are the benefits of EP Global Opps becoming a self-managed investment trust?
