339: Money Makers Investment Trusts Podcast - Andrew McHattie (20 Jun 2026)

[00:00:00][music] >> Welcome to the award-winning Money Makers podcast. I'm Jonathan Davis, the founder and host. For more than 6 years now, we've been providing comment and discussion about all the latest developments [music] in the world of investment trusts, the stock market listed funds, often called the City of London's [music] best-kept secret.

[00:00:17]I'm grateful to JP Morgan Asset Management for their continued no-strings support, which enables us to keep the podcast free while preserving our truly important independent editorial [music] principles. Please note that while our comments are well-researched and our opinions honestly held, we do not offer individual stock recommendations.

[00:00:36]In this episode of the Money Makers Investment Trust podcast, it's that time again to have a chat with Andrew McHattie, the editor of Investment Trust Newsletter, about some of the more interesting announcements we've had in the last few days.

[00:00:49]This is one of the regular roundups that we do. So, Andrew, welcome back to the podcast. We're going to start off, I think, by talking about what's been the big market event of the last few days, which is the IPO of SpaceX, Elon Musk's remarkably ambitious venture that covers a wide range of business activities, or at least business aspirations, not just the rockets and the satellites that it operates. So, first of all, we know that a number of trusts in the UK have significant shareholdings in this particular company, but let's just start by reminding ourselves what actually happened with the IPO.

[00:01:23]>> Yeah, sure, Jonathan. Thanks very much for having me back on again. SpaceX has very much been in the headlines, hasn't it? It's an extraordinary story in so many ways, and investors were not put off by so many of those curious clauses that we only see in Elon Musk companies, like the management options that vest if he establishes a meaningful community on Mars. Anyway, the price of the shares that IPO'd was 135 US dollars, and they were received extremely well by the market. There was considerable initial enthusiasm that drove the price up initially to about 175 and then up towards $200. And it has come back a little bit now to 180, but nevertheless, you'd have to say it is a tremendously successful IPO. It's a record IPO, the largest we've ever seen, and I think testament to just how well the American market functions in this regard.

[00:02:22]>> Well, when the might of Wall Street gets behind a very good idea, an exciting idea, they're certainly not short of muscle, that's for sure. And I think a lot of muscle was applied to this one, despite a lot of people saying that it was all ridiculous. The price to sales ratio of 93 times is extraordinarily ambitious. Though I gather it's not the highest there's ever been with an IPO.

[00:02:41]There was a company that was higher in the TMT bubble. But even so, it's going to have to go somewhere in order to meet that valuation. But in the short term, everybody loves it. And so, this obviously has had a lot of implications for investment trusts, as we've said already. And particularly the Baillie Gifford ones. Perhaps you could just quickly remind us which of the Baillie Gifford trusts have stakes in this amazing IPO? And uh what other trusts we know also have a holding?

[00:03:07]>> Yes, so I think you're right in targeting Baillie Gifford here as the major beneficiary because there are four Baillie Gifford trusts that have really very meaningful holdings in SpaceX. And those are Scottish Mortgage Trust, which is of course a trust we all know quite well and one of the major stalwarts of the sector, so lots of us will own that one. The Schiehallion Fund, which is a bit more esoteric. Baillie Gifford US Growth. And then finally, Edinburgh Worldwide, which of course has been effectively taken over by Sarab. So, that's an intriguing one. So, those all have holdings which will have benefited enormously from this because they were not valued actually at the full IPO price beforehand, but clearly now there is a liquid market price, they can be marked to market, and so we've seen the NAVs of these trusts rising quite substantially.

[00:04:04]>> Indeed, we have. And of course, that in turn, now that we have a a public price, that sets the figure that the investment trust have to use for their valuations.

[00:04:13]And the question is of course, is the price going to stick or not? In other words, have we already seen a lot of the price appreciation that we were expecting in anticipation of a successful launch? And I guess the question is now whether if you are a shareholder in these particular vehicles, whether you should be thinking about reducing your stake, bank some profits, or whether you should hold out for more. What do you think about that?

[00:04:37]>> As usual, Jonathan, you put your finger straight on the the meaningful question for everybody. I am quite skeptical about SpaceX and about its immediate future because I think very often what does happen here is that there is this tremendous media enthusiasm about the whole thing. As you rightly say, there are a lot of heavyweight names that put their shoulders behind this, partly because they want to make sure they get their fees. And of course then, as the few weeks slip by, so that enthusiasm dissipates and reality starts to bite.

[00:05:12]And I think if the market generally does suffer a little bit of a weaker patch, which I feel it will might, particularly if it looks as though US interest rates are going to rise, then my sense is that SpaceX could suffer disproportionately.

[00:05:30]>> [snorts] >> And so, the implication for those Baillie Gifford trusts is that I think they have a higher risk profile at this point. And if you're looking at the usual risk and reward ratio, then I think if you're a sensible investor, you may well think about top slicing your holdings and taking at least some profit at this level.

[00:05:51]>> Because one reason you might want to do that is because if you're an individual investor, you won't be restricted from selling fairly soon. A lot of private investors I think suspect will do that.

[00:06:00]Whereas a number of the bigger holders will actually be subject to what we call the lock-up agreement, which means they can't sell their shares immediately in the after-market. So, do we yet know what the lock-ups are for the various trusts that are involved? Because obviously that will have a bearing. If the shares do say fall 20% from here, then the actual gain that these trusts will make may or may not be reduced.

[00:06:21]>> Yes, I think it's slightly vague. Quite often there there is a very specific six-monthly period where former holders are not allowed to sell their shares in the market. But in this case, there is some provision for a certain number of shares to be sold within that first six-month period, but it's not very clear to me exactly what the quantum is and therefore exactly how much of their stakes trust could sell if they choose to do so.

[00:06:49]Now, of course they might not choose that and Baillie Gifford is of course a long-term investor, has been a long-term investor in SpaceX and may well decide to hold on to its shares. But I think given the quite high proportions of the portfolios in these shares now, just from a risk management perspective and a fairly sensible portfolio management perspective, I think the managers might like to sell some.

[00:07:14]>> Another factor in all this is that we know that there's been quite a lot of controversy about the extent to which SpaceX will be included in various market indices in which passive funds, i.e. tracker funds, have to go up to the market weighting and that obviously could be quite significant in this case.

[00:07:30]I think SpaceX will account for 1, 2, 3% that kind of thing of various indices. And I think with the consideration is that with Nasdaq, these passive funds will have to start coming up to weight within 15 days, which is very quick. Even there's only very small free float being offered here. So, it's a tricky picture for private investors to manage their way through. But, you would say that the prudent thing, as you said, is to take a bit of profits if you've been a smart enough to be in these ones at the right time.

[00:07:57]>> I think that's right. I think I think it would be prudent to do that. And honestly, Jonathan, I have very little idea as to whether that's the right thing to do or not in terms of ultimately how much profit you're making, but I do feel that you've got to look after your risk. And and in particular, given the fantastic success of this IPO, I think there's a lot of room for potential disappointment. So, it seems to me that yeah, you've got to be sensible and and trim it a bit.

[00:08:23]>> Yes, and I think that'll be, as I said, the challenge or the interesting part.

[00:08:26]And in addition to those Baillie Gifford ones, we know that RIT has a stake in SpaceX.

[00:08:31]And also, one of the private equity trust also has a reasonable holding in the newly listed company.

[00:08:36]Well, that brings us on to talk about Edinburgh Worldwide, that being the trust in which Saba Capital, the activist investor, has recently taken control of, or at least the directors they've nominated have been appointed to the board and are now in charge. And we're waiting to see what they are going to do.

[00:08:53]I think all we know is that they've said they've committed to having a tender offer as soon as practicable.

[00:08:59]I said, reading the announcement they made the other day.

[00:09:02]And they will do it as soon as practicable after the SpaceX IPO and the end of any relevant lockup periods. So, if you are an Edinburgh Worldwide shareholder, you've got another wait coming, haven't you, until you find out exactly what this new board is going to propose.

[00:09:18]>> Well, you have, and it feels as though poor shareholders in Edinburgh Worldwide are thrashing around in the dark here.

[00:09:25]There's so little information about what the intentions of Saba really are here, because we're assuming that it will switch to a mandate to invest in the investment trust sector, but we don't know that for sure. We don't know how quickly that may be the case. We don't know what size of tender there may be on offer, so whether you can exit completely. We don't know whether it might merge with Impax Environmental Markets, where that again has effectively now switched control to Saba because its nominated directors have been elected to the board. So, there are too many questions here for me and I find that very off-putting. I think one of the things we always hunt for as investors in stock market is some degree of certainty. That's one of the beauties of investing in a highly regulated London Stock Exchange market that we have some certainties about how things function. And at the moment we have very little certainty about what's going to happen with Edinburgh Worldwide. So, I find it a trust where it's very difficult to make a judgment.

[00:10:30]>> And one of the early decisions I guess the new board has to make. I mean, Baillie Gifford are still the managers of this trust. And they have a a broking firm, Deutsche Numis, acting for them. I mean, one of the decisions the board will presumably have to sanction is if Baillie Gifford as current managers decide to try and reduce their holding in SpaceX until or unless there's a new management arrangements introduced and approved by shareholders. So, I mean, that could be another complicating factor, could it not, in this rather murky picture?

[00:10:56]>> Well, it could. You're quite right because Baillie Gifford have the mandates and there are various parameters under which they are working.

[00:11:03]So, they still are able to make those decisions, obviously under the guidance of the board, but if the board has not given them any new instructions, then they're working exactly as they were before. So, I would expect them to deal with the stake in SpaceX pretty much in the same way for Edinburgh Worldwide as they will for their other trusts, subject to any specific lock-up arrangements. But, yes, that all remains to be seen.

[00:11:30]>> You did say, you know, the poor Edinburgh Worldwide shareholders. I mean they have actually made quite a lot of money from where they were, but if you've been a long-term holder of Edinburgh Worldwide, the share price is still, despite this remarkable impact of SpaceX, well below the all-time high.

[00:11:45]So, I guess it depends how long you've been a shareholder in the in the company, whether you're feeling exhilarated by the recent surge or whether you're still disappointed that the performance leading up to that was so poor.

[00:11:57]But I'm just looking through these numbers here. I mean, Scottish Mortgage is up 52% already this year, Edinburgh Worldwide up 34%, Scottish Mortgage up 25%, and Baillie Gifford European Smaller Companies up 16%, so SpaceX has certainly had a significant impact so far.

[00:12:13]Do you want to say any more about the situation at Impax Environmental Markets? You pointed out that that has now fallen into the hands of the directors appointed by Saba Capital. And again, I think we're not quite sure where that one's going to go.

[00:12:26]>> I think I would just be repeating myself, really. We have that same degree of uncertainty here that we have with Edinburgh Worldwide. Maybe slightly less because we can take that SpaceX factor out of the equation, but nevertheless, we're in the same situation where we don't know what the timetable is, we don't know exactly what's going to happen, when it's going to happen. So, I think if you're a shareholder, if you're still in the trust, you'll probably best off just waiting to see what occurs now.

[00:12:55]>> I've noted that the discount on Impax, if I remember, has gone out to 10% and uh on Edinburgh Worldwide, it's around 4 and 1/2% which has been trading briefly at a premium. So, the other risk is that until we know what's going to happen or until we know about the destination of the SpaceX shareholding, we don't know what the discount is going to do. And until we know what Saba's going to do with those two trusts, it just adds to the uncertainty. Do you have a an instinct as to what's going to happen to the discounts in these two trusts? I mean, my instinct would be that they they well widen a little.

[00:13:27]>> Well, they in the short term because of course it's not necessarily a straightforward issue to switch control, to sell down an existing portfolio, and to reinvest. There's quite a lot of cost involved in doing that. There's a period where you're not really invested in exactly what your mandate says you're going to be invested in, and undoubtedly some investors will not be content with what's happening.

[00:13:53]There are of course some investors who've really stuck their head in the sand about the whole thing and maybe haven't really followed the saga because they're not quite as fascinated by the sector as we are. So, it could be that when they get some documentation through telling them what's happening, they suddenly wake up to it and think, "Well, that's not really what I wanted. I'm going to sell out now." So, yes, I do feel there's definitely a chance of the two discounts widening.

[00:14:18]I would sense as well that there's quite a strong chance that Sabre will knock these two trusts together. So, I would expect those two discounts to converge over time as well.

[00:14:29]>> And to the extent that there's a tender at an attractive price, that will hold the discount for a while at least until we know where that's going. So, that will be another counter factor to throw into this rather confusing mix.

[00:14:41]Should we just mention before we leave the subject of space, we should mention what's been happening with Seraphim Space Investment Trust where, as we know, they launched a C share issue which was well supported. Do we know any more yet about the progress there at that particular company which has done also extraordinary well in the last few months?

[00:14:58]>> I think extraordinary is a very apt word here because I really think there are so many extraordinary facets of this trust.

[00:15:05]It's very volatile. The shares have moved around so much, and I must say that I felt they had got well ahead of the asset value. I'm talking about the ordinary shares here, not the new C shares because for a period the share price had gone up to about 260 p when the net asset value was 177.6 and that seemed to me to be a slightly too enthusiastic. So, I wasn't that surprised when the share price then fell back again. But, just to confound matters, Seraphim Space then came out with another extraordinary announcement this time about its largest holding, ICI, which had received some more funding at double all the previous valuation. So, at a stroke that added 73 p per share to the net asset value, which is a huge jump. So, if you take that into account, and it's not generally taken into account in the tables that you might see, then that takes the net asset value up to 250.6 p. And with the shares now well down from their peak of about 260 back down to about 200 p, that implies a discount of 20%. So, you'd have to say they're now looking reasonable value again. But, I think it's a difficult game to play, actually, just trying to pinpoint exactly which direction the share price is going to move around in in the near term. I think you're best off, if you can, trying to take a long-term view and deciding whether you want to be in the space industry or not. If you do, then sit tight on these. I think, you know, these shares could easily be 400 p in a year or two, or who knows, they could suffer some serious issues and then come back down again. It's an exciting trust and I think one that we're undoubtedly going to be talking about a great deal in the future.

[00:17:03]>> Indeed. Well, as you say, the share price has been very volatile. It's been up a lot over the last year and it has sold off recently. And the C shares are trading below their issue price quite significantly at the moment. Because, obviously, they're not yet sharing in the gains that the trust has made with its ordinary shares.

[00:17:22]You are listening to the Money Makers podcast. To keep up with every single item of news from the investment trust sector and all the latest share price, NAV, and discount movements, why not try a subscription to the Money Makers Circle, our premium content newsletter?

[00:17:35]You'll find there are in-depth independent profiles of more than 200 investment trusts and more commentary.

[00:17:41]Go to money-makers.co for more details.

[00:17:45]Do please like, subscribe, and share through whatever platform you're using.

[00:17:50]As well as the usual podcast channels, we can also be found on YouTube, TikTok, X, Blue Sky, and most recently on Substack. Visit the website for more details.

[00:18:04]So, let's move on then and talk about another deal that's come along, and that one involves a company called Pacific Assets, which has struck a deal with Schroder Asian Total Return. Perhaps you can tell us some more about this one, Andrew.

[00:18:18]>> Yes, this is a more traditional piece of investment trust news, or certainly traditional in the last couple of years because Pacific Assets Trust was really an underperforming trust that had really fallen out a little bit with its management, certainly fallen out of love with them, and the board instigated a strategic review at the end of last year. It's taken them exactly 7 months actually to reach a conclusion, which seems quite a long time, but they have now announced that they feel the best route forward is to combine with Schroder Asian Total Return.

[00:18:53]Effectively, that means Schroder Asian Total Return will take the trust over, and that means the combined trust will then have assets of 1.2 billion pounds.

[00:19:03]So, that's quite a significant size.

[00:19:06]About 520 million of that is Pacific Assets Trust. Some of that money may walk out of the door because there is a cash exit available here of up to 25% at a 2% discount.

[00:19:21]My feeling is that may well be taken up because the Schroder trust is trading on a discount of about 6.6% so actually if you come out at 2% with your cash and then decide to reinvest it in the sector, you can possibly achieve some slightly better value.

[00:19:38]Nevertheless, I think this makes sense and it does mean that we have four big trusts now left in the Asia Pacific sector all of which will have assets I think in excess of a billion pounds. So in my view this was probably the last of the consolidations we're going to see in this sector unless Schroder [snorts] decides to combine its remaining two trusts which I didn't think it will.

[00:20:05]>> Schroder's itself has just been sold has it not to a very large American firm? We don't quite know what the plans are for the investment trust business but I would suspect that you're right about what you say and so any surprise that Pacific assets has gone to Schroder Asian Total Return rather than the other candidates? I mean there's some other good trusts there as well of course.

[00:20:25]>> There are some other good trusts there but I quite like Schroder Asia Total Return and you can't really question I think Schroder's resources in the region. It really is a very significant manager in the area. It has a long track record so I think it's a safe choice. So I'm not surprised by this really. That's the quick answer.

[00:20:47]>> Well that deal will have to make its way through as you say. Pacific assets has been a poor performer and it had quite a lot of drama involving its management firm. It was managed by a firm called Stewart Investors and then their investment managers left dramatically last year and that's what led to this whole process which has resulted in the merger.

[00:21:06]So I guess we still know the full story about all of that.

[00:21:10]But, in any case, it's a bit irrelevant now. Let's move on then and talk about ST CL Efficiency Trust, which has also been in the news, but not for such good reasons, I guess it's fair to say.

[00:21:22]>> I think that is fair to say, yes. So, STCL Efficiency Income has been a poor performer as well for a while, and it's had some very specific issues. So, this is a renewable infrastructure trust, and it's really been suffering from its high debt load. So, it had exceeded the levels which it was allowed to take on, and it's struggled to sell assets to deal with that problem. In addition, it's obviously had no access to fresh capital because it's trading on a very wide discount, which before this news was already close to 50%.

[00:22:02]On top of all of that, it's had a bit of a cash crunch because it's had lower revenue from its Onyx Renewable Energy business in the US.

[00:22:12]So, there were quite a number of problems there, which the trust has now decided to deal with by proposing a wind-down. The board has said that the status quo is just not sustainable, and as part of this wind-down, which really may take quite a long time, it's decided that in the meantime, it really needs to husband its cash and prioritize the repayment of debt. And to that end, it has suspended the dividend payments.

[00:22:42]Now, that's a big deal because this is really an income trust. Many of the shareholders, in fact, probably nearly all of the shareholders here were buying for the dividend yield, which was extremely high.

[00:22:55]So, it's not that surprising that when this news came out, there was a rush for the exit, and the shares actually went down very sharply, 25% on the day of the announcement, and a little bit more since, although actually in the last couple of hours, we've just seen a very small bounce.

[00:23:14]So, that's more or less where we are.

[00:23:16]It's another sorry tale, and again, we don't know exactly how long it's going to take for investors to see any money back. This is one of the difficulties, I think, for bargain hunters who might well look at the current discount, which is over 60% now, and they might think, "Well, actually, even if the trust is not achieving great prices for its asset sales, there's a very wide margin. So, if I'm patient here, I may well make some money."

[00:23:46]But, the difficulty is you might have to be tying your money up for a very long time, and we know, Jonathan, don't we, that there've been so many cases where trusts aren't really not achieving very good prices for their assets when they are known distress sellers. So, I think it's understandable that investors who previously burnt their fingers on similar situations might choose to stay away.

[00:24:10]>> Yes, indeed. I could name you several examples of that happening. The thing about this one, which I guess does take some adapting to, I mean, it is significant size. I mean, it did raise an awful lot of money, and it still currently has a market cap of around 365 million, something like that. And yet, as you say, it's trading on a discount of 64% at least to the reported NAV. And the shares are down to about 33, 34 p.

[00:24:35]So, it's lost about 2/3 of the value.

[00:24:37]So, yeah, it's a sorry tale, and it's I fear another example of a trust that came to market in a very buoyant market, raised more equity perhaps than was wise, has taken on too much debt for what in hindsight turns out to be the path that which it's taken, and unfortunately, shareholders have had to learn a painful lesson in the process.

[00:24:56]Well, at least we'll be happy to say goodbye to that one, I think. Let's move on to another trust which has been actively trying to manage its discount.

[00:25:04]And that is TRIG, The Renewables Infrastructure Trust. Can you tell us what's happening there?

[00:25:11]>> So, TRIG is one of the big guns of the sector, I would say. It's got a market cap of 1.8 billion pounds. It's one of the trusts that I think is considered to be quite conservative. It offers a mix of assets across solar and wind and elsewhere in the sector. So, I think it's owned by many investors who are wanting broad exposure to the renewable theme.

[00:25:35]But again, it's been under pressure because it needs some capital allocation decisions to be made because on the one hand it wants to carry on investing and and to look after its future potential growth.

[00:25:48]But investors are also concerned about the discount, so they're looking for share buybacks. And the trust also wants to reduce its debt. So, it has already told us that it was going to undertake a 400 million pound capital realization program with the target it set in May.

[00:26:08]And it started off pretty quickly. So, it has now sold its 17 and a half percent stake in the Beatrice offshore wind farm for 155 million pounds.

[00:26:20]And it says it's going to use that capital to reduce its debts, to reduce its revolving credit facility.

[00:26:28]So, it actually seems to me that it's quite a good sale. It's been sold this stake at a valuation which is only a 4% discount to the holding value. So, I think that's a pretty good exit. It showed, I think, Jonathan that this was a good quality asset because it was actually bought by one of TRIG's partners in the deal under the preemption rights. So, that wasn't a difficult sale to achieve. But, Trigger's doing exactly what it told shareholders it would do, and it's well on the way to meeting that capital realization target.

[00:27:03]>> And in the meantime, it continues to pay a healthy dividend, which obviously is another potential use of capital that it may want to consider at some point, but presumably won't because that would have a similarly negative effect on a large part of the clientele that owns this particular trust.

[00:27:19]Well, the shares are up I think around 11% since the start of the Iran war, reflecting the fact that I think power price expectations have risen because of that. Interest rates have not come down, though, so that's a countervailing factor. If discount rates have to go up in due course, that would be a further challenge for the trust. And it's trading around 75p, and it's at a discount around 28%. So, has come in a little, but there's still a lot of work to be done here, I think.

[00:27:45]>> Well, there is, and I think the sector is at an interesting junction at the moment because there's this additional element of energy security, which has really become, I think, a very major factor for many governments around the world now. And if you're, I think, focusing more on renewable energy, then that is usually domestically generated, and it does mean that you're less reliant on importing gas or other forms of energy from other countries. So, in a way, I think it could be a very good time to invest in renewables, but it's a tricky thing, I think, for investment trust investors to do now because we've been through this dreadful cycle where we've seen these renewable energy trusts fall very considerably from premium ratings. I mean, it's hard to think of that now, but the whole sector was on a premium rating for quite some time when interest rates were near zero.

[00:28:39]And then the sector was really undone by its debt load, and by changing power prices. And now, of course, it's in a very different position, but I do feel that if you're a patient investor, maybe if you've been investing in this sector for a while, this would generally be a poor time to sell out. I think we may have some slightly better times ahead.

[00:29:01]>> I guess the only other potential caveat is we're recording this on Thursday afternoon.

[00:29:06]The voters of Wakefield are making their decisions even as we speak, and who knows where the Labour government's going to go if he wins that by-election, and we will know by the time this comes out. So, this is advanced speculation, if you like. But, there's been a lot of speculation about the future job that Ed Miliband might have. He's the energy secretary at the moment, and whether or not there should be some reigning in of net zero policies by the government.

[00:29:29]That's a live source of debate within the Labour Party at the moment. So, that may introduce another factor of political uncertainty as well, which may be a negative or may not, as we'll see.

[00:29:40]Let's talk about Alternative Income REIT, which is the recipient of a bid, but one that's not been particularly well received, I think.

[00:29:50]>> No, it's not an exciting bid, this one.

[00:29:52]I think there's an interesting position there, because Alternative Income REIT actually has been in the news for a little while. It's a very small trust.

[00:30:00]It only has a market capitalization of 56 million pounds. And I don't mind that, because I think actually it suits its shareholders very well. It manages its costs well, and I think there's a place for these small trusts, but it does rather stand out in the REIT sector as being an unusually small trust. And it wouldn't surprise me at all if it is taken out by a bid. Now, it did have a deal with AEW UK REIT back in April, but that deal fell through when AW UK REIT decided it wasn't going to proceed with its previous indicated offer, which was was good one. So, that deal was going to be at a 3% discount to the net asset value, which is 84.4 p now. So, that's our benchmark, I think, for what constitutes a good deal here.

[00:30:54]And the one on the table is really not up to that standard at all. The one on the table is from Glendale REIT, a 24% [snorts] shareholder in the trust, and it's not their first time bidding for this trust.

[00:31:09]Actually, in November, Glendale bid 66.5 p per share, which was rebuffed by the board.

[00:31:17]And now it's come back with 70 p per share, which again has received the same response.

[00:31:23]And I can see why. I really don't think that's a very full offer at all. I don't think it's going to be successful, and certainly I feel shareholders should just sit tight here and await developments.

[00:31:36]It could be that the Glendale offer will flush out a better offer from a counter bidder, and that might be Glendale's strategy. It wouldn't surprise me at all to see another better bid come along now.

[00:31:49]>> But we still don't know why AEW walked away from this particular deal. Did they find something that they didn't like, or was there some other reason why they had commercial reason why they didn't want to do anymore? I guess that might be something hanging in people's minds.

[00:32:03]Well, there's no point if you are a shareholder, I guess, hankering after something that has gone away. And if somebody else does come along, it would be difficult because they have to negotiate with the very large minority shareholder as well, I guess, which is what Glendale is. So, they're obviously trying to take advantage of the situation with a relatively lowball offer. I think that seems very clear.

[00:32:21]Well, that's that situation. Before we come on to a couple of results, let's talk about another situation which is not going well, and another consolidation potential wind-up or merger situation, which is the one involving Aquila European Renewables.

[00:32:37]Can you tell us what's going on with this one?

[00:32:40]>> A colorful situation this one, and it does have some analogous points, I think, with the alternative income REIT situation we've just been talking about, because again here there was a deal on the table that went away. And that deal was for the investment advisor, Aquila Capital, to buy about half of the portfolio.

[00:33:02]And that deal was going through, everyone was content with that, and then right towards the end of it, the investment advisor said, "Oh, well, actually, no, we need to renegotiate the price here at a considerably lower level."

[00:33:15]And so, the whole thing fell through.

[00:33:18]Now, this was very surprising, because Aquila Capital is the investment advisor. They should know these assets well, they've been engaged with them for a long time, they should know exactly what they're worth.

[00:33:29]So, this rather threw the cat amongst the pigeons, and the board was very unhappy with this, and has really fallen out with investment advisor.

[00:33:38]And that war of words has really escalated now.

[00:33:42]So, first of all, the board said at the start of June that Aquila was not providing the information that it had requested on various matters. So, it was obviously very unhappy about that, and decided to put that in the public domain.

[00:33:59]And then this week, it has said it's going to withhold part of the fees payable to Aquila, because again, it's still awaiting a response to some of these outstanding matters.

[00:34:10]And it wants to know exactly what Aquila Capital found that meant it should renegotiate the price.

[00:34:17]It's concerned, the board, about whether, in fact, the assets were valued correctly then beforehand. How long has Aquila Capital known that maybe they weren't worth what they previously said they were?

[00:34:29]It's another sad tale, this one, and we're [snorts] definitely going to have some more news on this, I think, because the board has set a very tight 5-day deadline for a response from Aquila Capital, and then may well take some further steps. So, we'll have to see how this one plays out. But in the meantime, it's not a good situation for shareholders. And I think there's always the potential for some speculative value in these circumstances, but I don't think I'd be prepared to touch this one.

[00:34:59]>> I think it is interesting because the board, if I've got this right, I remember Harbour Capital involved in this situation, are they? And Achilles, which was the trust they launched to try and do some activism in the alternative space, has a significant holding in this particular trust. It's one of their two significant plays at the moment. One of them has gone very well so far, but this one is not going well at all. But they're also doughty fighters. So, we've seen that in other situations. So, as you say, this appears to be a case of two bulls locking horns here. And both play hardball, at least that'd be my interpretation. So, that's certainly one to watch if you like a bit of cage fighting, shall we say, to coin a phrase. Corporate cage fighting.

[00:35:40]But we don't know where that's going.

[00:35:41]The share price has obviously suffered, and is down at just over 13p now, which is a long way from respectability, a long way I think from where the activists hoped it would now be.

[00:35:52]Let's take in a couple of results. You highlighted a couple, Andrew, so let's have a quick look at those. Let's start off with Fidelity China Special Situations, ticker FCSS.

[00:36:02]And that reported some full year results, and on the surface they look fairly impressive.

[00:36:07]>> Yes, I wanted to talk about this one because I think the figures are so interesting. And whether you consider them impressive or not, I think depends on your perspective. So, Fidelity China Special Situations is by far the largest of the three specialist China trusts, and it has been the one I preferred, actually, for quite some time on that basis, partly.

[00:36:28]And for the year to March 31st, its net asset value total return was 10.7%, which is well ahead of the MSCI China Index, which was only up 1.6%.

[00:36:42]So, that seems like a very good outcome.

[00:36:45]I would have to say though that if you look at performance tables, Fidelity China Special Situations is quite a long way behind both Baillie Gifford China Growth and J P Morgan Chinese Growth and Income over the last year. So, those trusts have actually found themselves in a much sweeter position. And I think it just shows actually that there's bound to be quite a lot of volatility in performance in these trusts.

[00:37:13]So, again, if you're very much on the ball and you follow China on a day-to-day basis, potentially you can benefit from that because you could switch between them. But I think apart from that, you're just best off taking a long-term view and deciding actually which trust you want to hold on to.

[00:37:31]It just reminds me as well of something I've applied in several specialist sectors, which is that we tend to talk about which is the best trust. That's the question we ask, which one of these would you own?

[00:37:44]And I think that's maybe the wrong question because I'm not sure you should own just one of them. But if you want Chinese exposure, you could definitely mix and match these, have more than one.

[00:37:54]And I think that's true in other sectors as well. For a long time I thought you should own both Polar Capital Technology and Allianz Technology Trust. I couldn't choose between them. And I don't think I have sufficient knowledge of China to be able to tell you which one of these trusts is going to do best over the next 6 months.

[00:38:12]>> Yes, I mean they have slightly different styles, don't they? And they're doing different things looking to play this market in a particular way consistent with their own approach and strategy.

[00:38:21]So, that's Fidelity China Special Situations, and you've also mentioned Worldwide Healthcare, which has produced some results as well. Perhaps you could tell us about those.

[00:38:31]>> This one caught my eye because Worldwide Healthcare, again, is a very significant trust in the healthcare sector, and I think in many ways it is the go-to trust for investors who just want broad healthcare exposure.

[00:38:46]And yet, it's been a laggard, actually, by quite a significant margin. It's been a poor performer in relative terms against its peers, and it has been a long way behind biotechnology trust in particular, and also a long way behind Polar Capital Global Healthcare over the last 3 to 5 years. So, my sense was that this trust was really in need of a decent set of results. And I must say it has delivered them. So, for the year to 31st of March, again, its net asset value total return was 10%, and that compares to the MSCI World Healthcare Index at 1.8%.

[00:39:29]So, that was actually a very good outcome, and that does, I think, show a significant bounce after a disappointing 2025.

[00:39:39]So, the trust benefited from being structurally overweight in biotechnology, and it also did very well from having a strange swap baskets of M&A candidates, and that basket went up 55%. So, that was very helpful.

[00:39:56]Just one final curiosity here was that the trust actually benefited from two big takeovers on 31st of March, the last day of their financial year.

[00:40:07]And that day was actually the best one-day excess return it's ever had in the history of the trust. So, very well timed. But I think nevertheless, this is quite reassuring for shareholders in Worldwide Healthcare.

[00:40:23]>> I think the other point just to mention in both these cases, the boards of both these trusts have been doing a lot of buybacks as well. So, they have actually been actively working on shareholders' behalf. I think in the case of Worldwide Healthcare they've bought back something like a quarter of the shares in the last reporting period. So, that's a significant number. So, they are doing what I think boards certainly have the option to do and I think in many cases are right to do.

[00:40:44]And healthcare has of course recovered strongly over the last 12 months, particularly in the biotech sector. We'll be doing another little podcast with the manager of International Biotechnology Trust shortly.

[00:40:57]So, final item on the list this week, Andrew, is Partners Group Private Equity Trust. You've singled them out and I think I know why, but I'll leave it to you to explain why.

[00:41:07]>> Yes, this trust, which actually if you're a seasoned investment trust commentator, you might think of it as being Princess Private Equity, which it was for most of its life, but it changed its name to Partners Group a couple of years ago.

[00:41:19]This hasn't been top of my buy list ever, actually, but it it really doesn't have a great track record and I think that is reflected in the wide discount to asset value, in common with many other trusts, of course, across the private equity space. It's about 28% that discount and there are clearly some disgruntled shareholders here. So, the trust has decided to do something about this and I think it's proposing a really interesting solution that could possibly be followed by some other trusts. This could possibly be a template. So, I'm interested to talk about it. So, it's saying to its shareholders, "Well, you can have a choice now of continuation shares or realization shares. So, we're dividing our capital into these two types of shares and you can choose whether you would to stay with the trust and will carry on doing exactly what we've been doing, or we'll have a realization pool, where we will slowly realize those assets and return capital to you.

[00:42:22]Now, that sounds to me quite a sensible idea when you have a divided shareholder base, some of them wanting to stay and some wanting to leave. And this really means the trust doesn't have to wind up.

[00:42:33]So, that seems to me quite sensible.

[00:42:36]And there are a few elements to this that I picked out that I think are important details.

[00:42:41]Now, one of these is that the realization pool is capped at 30% of the total share capital.

[00:42:50]And that means that it's not completely a free choice. In fact, if more than 50% of shareholders opt for the realization shares, then alternative proposals will be advanced, and that really means a wind-down. So, we'll have to see what shareholders want.

[00:43:06]Now, in terms of how long it will be before any money comes back to those who choose the realization option, well, we'll have to see. The trust has warned that it could take a very long time. It could take up to 8 years, which is a very long time.

[00:43:22]But it has also said, and I think the wording is so interesting here, it's said that it is seeking to optimize, rather than necessarily maximize, the value.

[00:43:33]So, what it's saying there is that they will be prepared to sell assets more quickly at a significant discount.

[00:43:41]So, I think that tells you that whilst the discount on the shares is 28%, opting for the realization pool doesn't mean you're going to get that down to zero. You're not coming out at the full net asset value, necessarily.

[00:43:55]The other big question for me, and which I think rather muddies the waters, is that it's not completely clear to me how the assets will will allocated to each of these two pools.

[00:44:09]Because it's not like [clears throat] an equity portfolio where you can just slice it up and say, "Well, 70% of everything goes to the continuation pool and 30% of everything goes to the realization pool." Because actually, these are chunky assets that you can't divide in that way.

[00:44:27]>> [snorts] >> And so, the board has got to decide which assets go to to which pool. And I think therefore, this is not an easy decision. Because you could say, you could argue that if the board is allocating assets that are more mature and therefore more likely to be sellable, more likely to be sold at a good price to the realization pool, then perhaps you're better off going with those. So, it's a very interesting, newsworthy point, I think. And I I don't know yet whether this is a good template or not. But I do think it's quite a sensible route forward and and one which is worthy of discussion.

[00:45:06]>> Yes, it's certainly a a different approach to that adopted by some other private equity trust. They're all now saying that they are taking active steps to manage the discount, try and bring it in.

[00:45:15]And they're all adopting capital allocation policies and so on. But this is a slightly different approach. And there could well be some read across to other parts of the private equity sector, I would think. Depending on what they do decide to realize, at what kind of value they are able to sell these holdings. So, I think that will be interesting.

[00:45:32]As you correctly pointed out, I think this has been one of the weaker performing private equity trusts, and none of them done particularly well.

[00:45:37]They are bouncing back now. But it will be interesting to read across. And I mean, I'm surprised in a way because the new chairman took over, I think, just over a couple of years, 2 and 1/2 years ago now. And I think there was an expectation that the board would grasp the nettle of what had been some missteps before then.

[00:45:53]But it's taken quite a long time. And that seems to be a recurrent theme that's running through all our conversations today, which is that when you're dealing with unlisted assets, it can take an awful long time to resolve matters even with the best intentions.

[00:46:06]Okay, so that brings us to the end of this week's edition. Uh I'd like to thank you, Andrew, as always for your comments and insights, and uh we'll look forward to talking again in a month's time. At the moment, there's an awful lot for the market to absorb in terms of the Iranian war, the ceasefire there, the AI, SpaceX dramas that are going on in the market, and the general air of bullishness around at a time when, as we learned this week, the central banks are not in a hurry to reduce interest rates as many had hoped.

[00:46:34]So, a very interesting time, as always.

[00:46:37]>> Thank you for listening to the Money Makers Investment Trust podcast, sponsored by J.P. Morgan Asset Management [music] and independently produced and edited by Money Makers.

[00:46:47]If you like what you have heard, do tell [music] your friends and colleagues, and remember to subscribe through your favorite podcast app or at the website, so you never miss an episode. And follow us on our social media channels. For more news, [music] commentary, and other investment trust content, don't forget to look at the Money Makers Circle, available for a modest subscription.

[00:47:07]All details [music] are at the website, moneymakers.co.

[00:47:12]Podcasts are provided [music] for educational purposes only, and nothing you have heard from any speaker should be regarded as constituting investment [music] advice.