Perpetual and Murray Income Trusts to Merge

After Mark Barnett was sacked from Perpetual Income and Growth, the trust will be merged into Murray Income, creating a £1 billion equity income trust giant

James Gard 29 July, 2020 | 11:35AM
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Charles Luke

Three months after sacking its manager Mark Barnett, the board of the Perpetual Income and Growth Investment Trust (PLI) has confirmed it will be merged with rival Murray Income Trust (MUT) to create a £1 billion equity income trust giant. 

The board of the Perpetual trust had been searching for a new manager after sacking Invesco’s Mark Barnett in April, following a sustained period of poor performance. Now, the trust will be liquidated and its assets combined with Murray Income.

Aberdeen Standard’s Charles Luke (pictured), who has managed the five-star rated Murray trust since 2006, will manage the combined entity. Luke also manages the five-star rated ASI UK Income Equity Fund, which has posted annualised returns of 6.59% over 10 years, according to Morningstar data.

Morningstar’s head of manager research, Jonathan Miller, says Perpetual shareholders will see a noticeable change in direction under the new manager; Luke tends towards quality growth stocks, while former manager Mark Barnett had a notoriously contrarian style of investing. 

“While the [Murray] trust has a long history, which includes year-on-year dividend growth, it moved to this way of investing in 2016 following a period of underperformance. We’ve started to see green shoots that this has been working, with improvements in stock selection, analyst accountability and decision making in the team," says Miller. 

Jason Hollands, managing director of Tilney, thinks it is a "more elegant outcome for investors in Perpetual Income & Growth trust, than the Board simply handing the mandate to a new investment manager".

Size and Scale

It is a rare event for two investment trusts to merge, but Perpetual Trust's chairman Richard Laing said the decision should have "great appeal" to investors. The move will create one of the largest investment trusts in the UK equity income sector.

The decision to merge with Murray Income is “recognition of the strength of the people, process and performance of our investment management team led by Charles Luke”, adds Neil Rogan, chairman of Murray Income Trust.

Aberdeen Standard says shareholders will benefit from the increased size of the company through lower annual management fees and ongoing charges as well as improving the liquidity of the shares. The annual fee for Murray Income is currently 0.66%, compared to 0.73% at Perpetual. 

Dividend Boost

Perpetual shareholders will receive a 13.6p dividend before the two companies are merged and will also be offered the chance to receive cash instead of shares in the new trust – but this option will be restricted to 20% of the company’s shares in issue. Laing points out that Perpetual shareholders will receive an immediate uplift because the Murray Trust is trading at a narrower discount to NAV – at around 4%, versus PIL’s 15% discount.

The Perpetual Trust’s share price is 30% lower since the start of the year, while Murray Income Trust’s share price is down 15%. 

Perpetual investors will, however, see a reduction in income as Murray's yield is lower. Despite that, the board point out that the income on the Murray trust should be more resilient. Indeed, the trust has been branded as "Dividend Hero" by trade body the Association of Investment Companies, as it has grown its pay out for 46 years in a row.

The trust's top five holdings – AstraZeneca (AZN), GlaxoSmithKline (GSK), RELX (RELX), Unilever (ULVR) and Diageo (DGE) – have maintained dividends this year amid a wave of blue-chip dividend cuts and suspensions this year. Astra shares have risen more than 15% this year to record highs as it leads the way in the race for the coronavirus vaccine

 

 

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James Gard  is content editor for Morningstar.co.uk