The £44m trust that’s merging with rival

TWO investment trusts have revealed plans to merge.

In an unusual move, the Threadneedle UK Select Trust and Henderson High Income Trust have proposed a tie-up.

Board members at Threadneedle said the £44m trust was not able to continue in its current form and had few options to grow to a sustainable size.

Shares in the trust, which launched in January 1959, have traded at a 13pc discount for the past year. Normally firms try to close discounts such as this, but the trust has failed to do so.

Despite that, the trust has been a top performer in its sector and has returned 27.2pc over the past year.

The board said it had reviewed potential merger candidates and ‘following a beauty parade process’ recommended the £210m Henderson trust, which should take place in June if shareholders approve.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘Unfortunately the Threadneedle UK Select Trust has caved into the inevitable pressure of being a minnow in a world where scale is important – without it, trusts face higher costs and have less liquidity, neither of which investors like.’

David Warr, chairman of the Threadneedle Trust, said: ‘While the board has been satisfied with the performance of the trust over recent years, we recognise the importance for shareholders of scale and liquidity for their investment.’

He said the Henderson Trust, which has returned 18.8pc over the past year, offered an attractive dividend yield – currently around 4.8pc – and traded at a premium to its net asset value.