The AIC: Record year for buybacks as trust boards battle double-digit discounts

Share price discounts remained above 10% throughout 2023, according to AIC’s year in review


Investment trusts set a record year for buybacks in 2023 as boards battled to narrow discounts in the face of difficult market conditions.

A total £3.57bn shares were repurchased, representing a 32% increase on the £2.7bn bought back in 2022, according to Winterflood and Morningstar data.

In a turbulent year for the trust sector, the average share price discount remained in double digits for the entire year – the first time post-2008.

After beginning the year at 11.7%, discounts hit a post-GFC low of 16.9% in October. However, they have since narrowed to 11.1%.

Corporate activity

In a heightened year for board-level activity, the sector saw nine manager changes, four mergers, and eight liquidations.

Among the manager changes, Mid Wynd International appointed Lazard AM to replace Artemis in October, while the embattled Home Reit appointed AEW UK as part of its efforts to turn the trust around.

August saw the liquidation of three trusts, with Axiom European Financial Debt, Secured Income Fund, and Momentum Multi-Asset Value all discontinuing in the month.

Meanwhile, Nippon Active Value absorbed both Atlantis Japan Growth and Abrdn Japan IT.

2023Investment company (current name)New management groupAIC sectorPrevious management group
JanMajedie InvestmentsMarylebone PartnersGlobal Equity IncomeMajedie
MayHome REITAEW UK Investment ManagementProperty – UK ResidentialAlvarium Investments
JunCeiba Investments[Self-managed]Property – Rest of Worldabrdn
JulInvestment CompanyChelverton Asset ManagementUK Smaller CompaniesFiske
OctMid Wynd InternationalLazard Asset ManagementGlobalArtemis Investment Management
NovAsian Energy Impact TrustOctopus Energy GenerationRenewable Energy InfrastructureThomas Lloyd Global Asset Management
NovUS Solar FundAmber Infrastructure GroupRenewable Energy InfrastructureNew Energy Solar Management
NovInternational BiotechnologySchroders Investment ManagementBiotechnology & HealthcareSV Health Managers
DecMIGO OpportunitiesAsset Value Investors (on 15 December)Flexible InvestmentPremier Miton
Source: AIC

A further quartet of mergers are expected to complete in H1 2024, including Abrdn China Investment Company with Fidelity China Special Situations.

Richard Stone, chief executive of the Association of Investment Companies (AIC), said: “Investment company boards have worked hard this year to deliver value to shareholders in challenging market conditions. For some, this has meant buying back shares, while others have taken the more radical steps of changing manager, merging with another investment company or even winding up the company.

“Discounts on investment companies were historically wide this year and that has increased the attraction of share buybacks. Towards the end of the year we have seen discounts narrow as investors begin to believe that interest rates have peaked and could be heading downwards in the not too distant future.”

See also: Mid Wynd chair Russell Napier on switching trust management to Lazard

In terms of performance, the average trust returned 5% in the year to date to 8 December.

Private equity dominated returns by sector, with the average PE trust up 48.7%.  Technology & Technology Innovation and India/India Subcontinent also enjoyed strong performance in 2023, returning 38.8% and 15.5% respectively.

Two trusts floated their stocks at initial public offering (IPO) this year, with Ashoka White Oak Emerging Markets Trust listing on the London Stock Exchange and raising £30.5m, and Onward Opportunities listing on AIM in March and raising £12.8m.

Hedge fund BH Macro topped the charts for secondary fundraising, bringing in £315m. Other notable fundraisers included JPMorgan Global Growth & Income (£153m) and City of London (£106m).

Investment companyAIC sectorTotal secondary fundraising in 2023 (£m)
BH MacroHedge Funds315
JPMorgan Global Growth & IncomeGlobal Equity Income153
City of London Investment TrustUK Equity Income106
3i InfrastructureInfrastructure102
Castelnau GroupFlexible Investment57
Source: AIC