The agreement, announced yesterday by BPCE — Natixis IM’s parent company — and Generali, will see the launch of an asset manager with €1.9trn (£1.6trn) assets under management.

The parent companies will own 50% each of the combined business, with balanced governance and control rights.

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BPCE CEO Nicolas Namias will chair the board of the new entity, with Generali CEO Philippe Donnet as vice chair.

Meanwhile, current Generali Investments Holding CIO Woody Bradford would serve as CEO, with Natixis IM CEO Philippe Setbon as deputy CEO.

Subject to regulatory approval, the merger is expected to complete by early 2026.

Both parties cited critical scale, an enhanced offering in private assets to meet growing demand, and strengthened global distribution capabilities as some of the factors behind the deal.

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The move will see a reduction in the number of UK equity funds the business will run from five to three, and means the UK Sustainable Equity fund will no longer exist in its current form. Similarly, the firm’s UK Smaller Companies fund will also be merging with the UK Special Situations fund in the first half of 2025, subject to investor approval.

Launched in 2018, the Ninety One UK Sustainable Equity fund was designed as a strategy that contributed to a more sustainable future through investment in UK companies, as well as delivering outperformance of its benchmark over the long term. It is run by Matt Evans (pictured).

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In a statement, Ninety One said: “We regularly review our funds to ensure that they continue to offer investors the very best of our long-term investment management expertise. We can confirm that the UK Sustainable Equity fund will be merging with the Global Sustainable Equity fund in the first half of 2025, subject to a favourable resolution passed by investors. 

“The receiving fund, which has a similar approach to sustainability and is supported by the same investment team, benefits from a wider range of investment opportunities geographically. Our broad Sustainable Equity capability remains strong and offers solutions used by a variety of institutional and advisor-led asset owners.”

Ninety One’s Global Sustainable Equity fund is co-managed by Stephanie Niven and Miles Hamilton, who have been running this fund since March 2022 and November 2023 respectively. The fund invests in companies across the globe, with its level of investment in the UK much lower than the UK Sustainable Equity fund. For example, at the end of October 2024, it had just 6.1% of its assets invested in UK-listed companies.

Evans will continue running the UK Sustainable Equity fund until the fund merges, and will then remain with the business, conducting research as part of the sustainable equity team.

See also: Ninety One Diversified Income promoted to Hargreaves Wealth List

Responding to the news, Hargreaves Lansdown decided to remove the Ninety One UK Sustainable Equity fund from its Wealth Shortlist, with Joseph Hill, senior investment analyst at Hargreaves Lansdown, adding that their conviction in the UK Sustainable Equity fund “has largely laid with its manager Matt Evans, who we think is a committed and passionate sustainable investor”.

Given the fund will no longer be available to invest in its current form in due course, or be managed by Evans, Hill concluded it was right to remove the fund from Hargreaves Lansdown’s Wealth Shortlist.

This story orginated on our sister title, PA Future

The article stated that an initial joint venture between the two firms has been discussed, as well as a full acquisition by Amundi.

AllianzGI currently has €550bn in assets under management, according to its website, while Amundi’s assets stood at €2.2trn as of 30 June 2024.

Rumours surrounding a proposed combination began more than a month ago, according to a Reuters article published at the end of October, with the German insurer seeking to grow the asset management arm of its business.   

A spokesperson from Amundi declined to comment.

Amundi, which has grown through numerous acquisitions over the years, also agreed to purchase Alpha Associates in February this year. The asset manager, based in Zurich, provides private market, multi-manager solutions to investors.

The expanded pan-European small-cap team will be led by Mine Tezgul, with over £5bn in AUM as of June 2024. Meanwhile, the UK equities team will continue on as a large cap manager.

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The Global Fundamental Research team, with over 125 members, will also absorb the Responsible Investment Research team, which was previously a separate entity.

A spokesperson for Columbia Threadneedle Investments said: “We have built a world class global research capability, operating as a core pillar of our investment philosophy and we have recently strengthened this team by integrating our Responsible Investment analysts.

“Separately, we have further globalised our fixed income corporate research, better reflecting the nature of corporate fixed income markets. Within equities, we have invested in and grown our pan-European equity research team based in London to support our UK, European and global fund managers.”

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After transferring Asia Dragon’s assets into the Invesco portfolio, the newly combined trust will be renamed Invesco Asia Dragon.

It concludes the strategic review Asia Dragon launched in May after earlier attempts to rectify its discount had failed. Asia Dragon merged with abrdn’s New Dawn trust in November last year, but its shares are still trading 11.8% below its net asset value.

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In addition to lifting its discount, the new merger aims to lower its management fees, bringing the ongoing charges figure to blow 0.70%.

Neil Rogan, chairman of Invesco Asia, said: “For our own shareholders, apart from the lower fees and greater liquidity, it brings the scale to add to our existing buy ratings that will spur future growth.

“Our proposed discount management policy is bold, and provides the opportunity for us to break free from the persistent discounts and locked registers from which so many Asian and Emerging Markets trusts have suffered.”

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Asia Dragon was down 13.4% over the past three years, whereas the Invesco Asia made a positive return of 2.8%, beating its MSCI Asia ex Japan benchmark by 3.7 percentage points.

Fiona Yang and Ian Hargreaves, co-managers of Invesco Asia, added: “This comes at an exciting moment to invest in Asia, with valuation disparities across the region offering abundant opportunities for the active investor.

“We are delighted that the strength of our investment proposition has helped to secure this opportunity for the Company, and we are confident in our ability to continue to secure the attractive long-term investment returns that we have delivered for Invesco Asia shareholders so far.”

The two trusts have made negative returns in recent years despite a roaring rally in Japanese equities. JPM Japanese – which will continue to be managed by Nicholas Weindling and Miyako Urabe after the merger – was down 10.6% over the past three years while the TOPIX benchmark index pounced 19.1%.

JPMorgan Japan Small Cap Growth & Income’s performance was even more stark, dropping 28.5% over the period while the market rallied.

Alexa Henderson, chair of the JPMorgan Japan Small Cap trust, said the board had “considered a number of possible alternatives” to solve this negative performance and ensuing 13.3% discount before settling on the decision.

She noted that the merger – which will be completed by October this year – would make its fees more attractive to investors, with its current charge of 1.02% dropping in line with JPM Japanese’s 0.61% fee.

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Other than these “significantly lower costs for shareholders,” Henderson hopes that the enlarged size of the FTSE 250 trust would also bring benefits.

The announcement said combining the two into a larger vehicle would result in “increased secondary market liquidity, a larger marketing presence, and a greater relevance to larger investors as a direct consequence of size”.

Andrew Courtney, investment analyst at QuotedData, said the merger should go ahead with some ease given the similarities in approach and provide benefits for shareholders of both trusts.

“From a practical perspective it appears that little will change for JFJ investors outside of the usual scale and management fee benefits, with JPMorgan also covering the transaction costs of the deal,” he said. “JSGI investors will benefit from an economic uplift given the divergence in discounts, and will benefit from the solid trajectory of the JFJ trust.”

This morning (26 June), the boards of both trusts announced that Witan’s assets will be rolled into Alliance Trust, creating a vehicle with net assets of approximately £5bn. This will make the proposed merger the single largest trust merger to have taken place in the UK.

Should the deal get the green light, the merger will complete between September and October this year, when the new shares for Alliance Witan will be issued.

The combination will take place via a scheme of reconstruction by Witan, while WTAN’s shareholders will be able to opt for a cash exit at 97.5% of NAV minus costs – subject to a 17.5% limit on shares held.

The merger will also lead to a lower management fee structure for the trust, as well as an OCF below 60 basis points. Currently, Witan and Alliance Trust’s OCFs stand at 76 and 62 basis points, respectively.

See also: Alliance Trust replaces Jupiter with Arga following Whitmore’s exit

Andrew Courtney, investment analyst at QuotedData, said that while the move is “not unexpected” given the retirement of Witan CEO Andrew Bell, the announcement “remains a significant one”.

“The deal with Alliance appears to be a good fit on first blush, given the similarities of the two funds – both are large global funds with multi-manager approaches – and is certainly a positive for both in our view given the benefits of increased efficiency that the combination will bring.”

Dan Cartridge, fund manager at Hawksmoor Investment Management, said he can “see the benefits of the merger”. “The investment trust sector has been facing material headwinds in recent years with cost disclosure issues, outflows from the UK market, and the consolidation of the wealth management industry. This is creating a need for lower cost, larger and more liquid vehicles which the combined entity will create.

“We are also a fan of having a cash out option and Witan shareholders have the option to get around 18% of their investment back in cash, helping to reduce the supply of paper and potentially help narrow the discount of the combined entity (alongside increased demand that FTSE 100 inclusion would bring).”

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Emma Bird, head of investment trusts research at Winterflood, agreed the offer of a cash exit for Witan shareholders is “best practice”, but pointed out that some shareholders “may have wanted a bigger exit opportunity” than 17.5% given the size of both trusts.

However, she added: “We think that the combination of WTAN and ATST makes sense and is not a great surprise given the recent announcement by WTAN that it was reviewing its management arrangements and the similarities between the two funds’ investment approaches, with both being multi-manager global equity funds.

“The  contribution from WTW should mean that ATST shareholders suffer no cost dilution as a result of the transaction, while they will also benefit from a larger, more liquid, higher profile, lower cost vehicle, enhanced by the reduced management fee.”

Iain Scouller, analyst at Stifel, added that the increased scale of the investment company offers the benefits that come with being a “larger, more liquid company”. However, he highlighted the trust’s potential FTSE 100 inclusion could be a “double-edged sword”.

“We think the share price of FTSE 100 companies can be quite highly influenced by ‘basket trades’ and other index activity, which can increase share price volatility of FTSE 100 constituents,” he warned.

Performance uplift for Witan

A key benefit for Witan shareholders, according to analysts, will be the performance tailwind from ATST. Managed by Willis Tower Watson, the latter has achieved a total return of 29.6% over the last three years, outperforming the MSCI ACWI index by approximately 100 basis points over the period, according to data from FE Fundinfo. In contrast, Witan has returned 16.6%, although both vehicles have comfortably beaten the average peer’s three-year gain of 5%. According to AIC data, ATST is trading on a 5.6% discount to its net asset value, while Witan is trading on a discount of 7.8%.

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Thomas McMahon, head of investment companies research at Kepler Partners, said: “ATST has an impressive track record, having outperformed global equity indices over a difficult period, with multiple style gyrations. This is what the process is designed to do, so it is clearly great proof of concept for the manager.

“The combined portfolio should continue to offer an attractive way to invest in equities over the long run which should appeal to retail investors who want to buy and forget. The larger size should improve liquidity and also allow long-term institutional shareholders to take a position.”

QuotedData’s Courtney added: “Witan shareholders will also benefit from Willis Towers Watson’s approach that has driven ATST’s superior performance as well as the 5% discount level that ATST defends.”

Stifel’s Scouller said one of the main drivers of Alliance’s higher returns has been its exposure to the Magnificent Seven companies, which comprise approximately 15% of its portfolio at present – almost double that of Witan’s at 9%. “We think the future performance of the Mag Seven companies will have an important influence on the returns of the combined trust,” he reasoned.

Courtney goes as far to say the merger is “likely in response to Witan’s ongoing poor performance”, pointing out the investment company is “one of the worst performers over the last 10 years”. Over the last decade, Witan has returned 134.5%, compared to the IT Global sector average’s total return of 149.6, and the MSCI ACWI’s gains of 202.9%.

‘Some work to do’

While analysts are largely supportive of the proposed merger, they point out that there could be some complications afoot.

Hawksmoor’s Cartridge said: “Where we’re a bit more concerned is that Witan has around 8% of its portfolio invested in other investment trusts, which will need to be sold (not immediately, but ultimately that will be the direction of travel).

“So, while good in one regard, it will also reduce demand for some very good existing investment trusts across private equity, property and infrastructure at a time when discounts in these areas are already very wide.”

Kepler’s McMahon agreed, adding: “In the short-to-medium term, there will be some work to do in selling the old Witan portfolio, in particular some less liquid investment trust shareholdings. This will have some associated costs, although the plan to avoid any deadlines for selling should afford flexibility in getting the best deal for shareholders.”

‘The bottom line’

Considering all aspects of the proposed merger, Darius McDermott, managing director at FundCalibre, said: “The bottom line is the Alliance Trust has achieved better performance than Witan, so it will benefit Witans shareholders from that perspective. The combined entity will have a lower fee, which is a move in the right direction.

“They are both big trusts already but there may be some benefit of a larger combined entity, although that is not initially obvious.”

Kamal Warraich, head of fund research at Canaccord Genuity Wealth Management, said the merger “looks to be appropriate given the relatively similar approach and shared characteristics” of both trusts. “We are also favourable on prospects for enhanced liquidity and the potential for decreased fees given the benefits of scale.”

Scouller said Stifel has upgraded Alliance Trust from ‘neutral’ to a ‘positive’ rating, and has downgraded Witan to ‘neutral’ from ‘positive’: “We thought a Witan/Alliance combination was quite a likely outcome of Witan’s strategic review. We view it as the best-fit outcome, given these two trusts have a relatively unique multi-manager approach to investment.

“This merger makes sense for shareholders and is a logical outcome of the review process.”

The merger, which follows a strategic review from Witan’s board, comes following the retirement of Witan’s CEO Andrew Bell (pictured).

After Witan’s assets are rolled into Alliance trust, the new investment company will have net assets of approximately £5bn.

See also: Andrew Bell retires from Witan triggering management review

The merger will maintain a multi-manager approach to investing in global equities, overseen by Alliance Trust’s investment manager WTW. Alliance Trust will therefore see its investment process unchanged, with the bigger trust investing in a selection 10-to-20 of their best trust ideas.

According to the boards, the enlarged trust will become an “even more liquid, high-profile and cost-efficient ‘one-stop shop’” for global equity investors, with eligibility for FTSE 100 inclusion and “well-established brands” from both investment companies.

Dean Buckley, chair of Alliance Trust, said: “The formation of Alliance Witan brings together the two leading open-architecture multi-manager investment company propositions in the UK to form a FTSE 100 equity investment vehicle with the quality, cost efficiency and profile to play a leading role in the UK investment market.

“Shareholders will benefit from access to the proven investment process implemented by our investment manager, Willis Towers Watson, and access to the world’s leading stock pickers. This is also a significant moment for our industry in broader terms – Alliance Witan represents a key milestone in the history of the investment trust structure which has demonstrated its capabilities very effectively over many decades.”

He added: “Witan was an early adopter of the multi-manager solution and, on behalf of my board, we congratulate Andrew Bell and his team on all that they have achieved during their tenures. Combining our two historic companies, established in 1888 and 1909 respectively, recognises the attractive opportunity to deploy the investment strategy, which has been proven to be robust through the investment cycle, at significantly greater scale.”

See also: Alliance Trust replaces Jupiter with Arga following Whitmore’s exit

Andrew Ross, chair of Witan, said since Andrew Bell announced his intention to retire, the company’s board has been through “an extensive process to identify the best candidate to take on the management of our shareholders’ assets”.

“The board assessed a number of very strong proposals, including single-manager candidates with impressive track records. However, the board was unanimous in recommending the combination with Alliance Trust, which allows the continuation of our multi manager approach at lower fees and in a larger, more liquid vehicle.

“The companies share similar cultures and a mutual desire to provide a ‘one-stop shop’ for retail investors in global equities. I am delighted to announce this transaction, the largest ever investment trust combination, in Witan’s 100th year as a quoted company on the London Stock Exchange.”

Under the plan, its Income and Growth VCT and Mobeus Income and Growth VCT will be merged into a new ‘Acquirer VCT’ worth a combined £190.8m in assets under management (AUM).

Likewise, the Mobeus Income and Growth 2 and Mobeus Income and Growth 4 funds will be merged into a singular ‘Target VCT’ with £128.8m in AUM.

The proposed plans – which aim to create greater cost savings, administration efficiency and simplicity – will be discussed with shareholders at their upcoming general meetings on 18 and 26 July.

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Fees and taxes during the process are expected to cost Mobeus £1.1m, but the mergers could ultimately save shareholders £798,387 a year moving forward.

These cost savings, paired with the enlarged assets of each new funds, are hoped to provide greater liquidity which can be returned to shareholders through dividend payments.

Each of the VCTs share the goal of generating a regular income stream by investing in “young unquoted UK companies for the purpose of their growth and development”.

They were launched in the early 2000s and made returns upwards of 173.2% over the past decade. The best performer – Mobeus Income and Growth 4 – was up 245.5% over the period, far in excess of the FTSE All Share’s 77.7% return.

The current arrangement with investment adviser Gresham House will be revised if the proposed mergers are passed, with the new terms being fixed for an initial one year contract.

See also: Abrdn’s Asia Dragon Trust board launches strategic review

In a statement this morning ahead of a Capital Markets Day (12 June), the firm’s parent company announced plans to bring together LGIM, its investments division, with Legal & General Capital, its alternatives platform.

LGIM has begun a ‘global search’ for a successor to Scrimgeour, who took on the role in 2019. She will stay on at the firm while the search completes.

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Meanwhile, Legal & General Capital chief executive Laura Mason has been named CEO of private markets and will oversee the merger of the two businesses alongside Scrimgeour.

L&G is targeting an £85bn growth in assets under management on its Private Markets platform by the 2028 financial year.

The group also announced a £200m share buyback for 2024, as part of new CEO António Simões’s plan to increase shareholder returns.

He took up the role at the start of 2024.

“Over the last five months we have rigorously reviewed our business, listening to investors, customers, partners and employees. This work has deepened my belief in our strong foundations and excellent potential. L&G is in prime position to respond to and benefit from major structural and societal changes,” CEO Simões said.

“Changing demographics, climate transition, economic uncertainty and technology are driving demand for trusted, experienced investors that can manage risk through the cycle, originate productive assets, and deliver returns for savers. Our vision is for a growing, simpler, better-connected L&G, focused on three core business divisions, and set apart by our shared sense of purpose and powerful synergies.

“By seizing the opportunity in Institutional Retirement while investing to scale and deepen our capabilities in Asset Management and Retail, we will evolve our business to better address society’s changing investment needs.”

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Stanhope Consulting has been appointed to assist with the review, while the board will also “consider proposals from established fund management groups” with experience of managing similar equity strategies. In an announcement published on the London Stock Exchange today (21 May), DGN’s board said any interested parties should contact Stanhope Consulting directly.

In July last year, DGN proposed a merger with the Abrdn New Dawn investment trust in order to improve liquidity, reduce management fees and lower ongoing charges. The deal completed in November 2023, yet the new larger trust still resides on a 9.9% discount to its NAV, according to AIC data.

On 7 May this year, the £34m Ashoka WhiteOak Emerging Markets Trust proposed a merger with DGN, which received support in principle from 56% of Asia Dragon’s shareholders.

Over three, five and 10 years, DGN has languished in the bottom quartile for its total return, having lost 16.1% over the last 36 months alone. It has, however, achieved top-quartile double-digit gains over one, three and six months, according to data from FE Fundinfo.

The board said it had always planned to closely monitor the performance of DGN following the merger, particularly in relation to understanding “the drivers behind relative performance of the company and actions being taken by the company’s investment manager, Abrdn Fund Managers, in light of such performance”. It also said in the trust’s prospectus that it would keep monitoring its discount.

DGN’s board stated this morning: “In connection with this exercise, and further to the company’s announcement on 7 May 2024, the board believes it is now appropriate to undertake a full strategic review of the future of the company, including the ongoing investment management arrangements.

“The board will be interested to consider proposals from established fund management groups with experience of managing equity strategies similar to that currently pursued by the company. Any such proposals will be considered alongside the current management arrangements.”

It added there is “no certainty that any changes will result” from the strategic review, while the board will make further announcements “in due course”.

Following the announcement on 14 March, which would mean both trusts combine to make one flagship European product for Janus Henderson called Henderson European Trust, HNE’s board was sent an “unsolicited non-binding proposal” from a third party, regarding an alternative merger.

According to HNE’s board, the approach was considered before re-engaging with the board of HEFT as well as with major shareholders. Both trusts have subsequently revised the terms ahead of the proposed merger.

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Management fees for the combined trust for up to £500m per annum will stand at 60 basis points, but second-tier fees on assets between £500m to £1bn will be reduced from 50% to 47.5%. Charges on net assets above £1bn will be 45 basis point per annum.

Under previous proposals, HNE shareholders could choose to receive cash for some or all of their shareholding, subject to a limit of 5% of HNE’s share capital. HEFT was also proposing a tender offer to HEFT shareholders of up to 5% which, according to its board, “broadly reflected the cash exit being provided for HNE shareholders”. Now, the limit on the cash exit has been increased to 15%.

Janus Henderson has confirmed it will contribute £1.55m to combined costs associated with the merger. This would mean that, net of the 2% discount to the HNE cash exit and HEFT’s tender holder, the merger will be cost-neutral for existing investors.

See also: £34m Ashoka WhiteOak Emerging Markets Trust proposes Asia Dragon merger

An further discount control mechanism has also been agreed on, in additional to the five-year performance-related tender offer already agreed on under previous proposals. Now, the trust’s combined board will consider “additional opportunities” no earlier than the initial three-year period following the merger.

The boards said: “The board of the combined trust’s consideration will, alongside other factors, recognise the importance to shareholders that the combined trust’s shares should not persistently trade at a significant discount to NAV in absolute terms or relative to the combined trust’s peer group.”

Formal documentation of the updated proposals will be send to shareholders by the end of the month, with general meetings due to be held in June and July. Both boards expect proposals to be concluded by the end of July.

Prior to the updated proposals, 37.6% and 35.4% of HNE and HEFT shareholders, respectively, had already suggested they would vote in favour of the merger. This number has increased, according to the trusts, following some of the amendments put forward.