A lot has been said and written in recent weeks about the state of the investment trust sector.
Saba’s attempts to take control of a series of trusts came to naught — though the US hedge fund is not going quietly and has now adopted a different tactic.
But are there alternative routes to reviving the UK investment trust sector?
That’s certainly what veteran City fund manager Christopher Mills seems to think.
This week Mills launched the Achilles Investment Company in the first investment trust IPO since 2023.
Mills is the founder, chief executive and chief investment officer of Harwood Capital, which operates a range of funds, including the £744mn North Atlantic Smaller Companies investment trust.
Achilles is a much smaller undertaking than those enterprises, it recently raised £54mn in its recent flotation on the London Stock Exchange.
Of that £54mn, £1.5mn was Mills’s personal money. The target for the fundraise was between £50-60mn, and Mills said in the current tough market conditions he regards raising £50mn as an “achievement.”
In terms of what the money will be used for, Mills has teamed up with Robert Naylor, former chair of the Hipgnosis Music Royalties investment trust.
He said: “The aim is to invest in up to four of the alternative investment trusts on the London market, and work with those trusts to improve corporate governance, and to narrow the discounts those trusts trade at. What we are not trying to do is be another Saba, and increase the assets under management of Achilles or of Harwood.”
He said the focus will be on investing in no more than four investment trusts at a time, and the trusts will be in the alternatives sector, including real estate and infrastructure “as that is where the best opportunities are”.
Mills believes a general market scepticism around the value of unquoted assets is behind the discounts at which his and other trusts trades.
He said he believes one outcome of the current wave of activism is that fund management firms will no longer be able to get multiyear contracts to run investment trusts, and instead the reviews will be annual.
There is no intention for Achilles to raise any more than the £54mn already gathered.
Mills acknowledged that his attempts to be an activist investor focused on reducing investment trust discounts is hindered somewhat by the fact the largest trust he personally manages, North Atlantic Smaller Companies, trades at a discount to its net assets of 33 per cent.
It’s a £744mn of assets trust, in which Mills has a 30 per cent stake.
He said he has been diligent in his attempts to narrow the discount, including through share buybacks, greater media presence, and twice yearly shareholder meetings.
Mills said a particular challenge for his trust is that many of the shareholders are, like himself, long-term in nature, and so are not selling their stock.
The trust has bought back lots of shares over the past year, with Mills stating he did not sell any of his holding, and that he would like to buy more shares in the trust himself, but is forbidden from doing so, under stock market rules.
That’s because individuals or entities are not permitted to own more than 30 per cent of a listed company in normal circumstances without being obliged to make an offer for the whole business.
This means there is very little liquidity in the shares, as, despite it trading at a large discount, there are few shares for sale on the open market, which, according to Mills, means the larger wealth managers have been unable to invest in the trust.
