Aberdeen UK Tracker Trust plc and BlackRock Income Strategies Trust plc merging to create a £500 million investment company

Aberdeen Asset Management is pleased to note the announcements issued today by Aberdeen UK Tracker Trust plc and BlackRock Income Strategies Trust plc, regarding the two investment companies merging to create...

Aberdeen Asset Management is pleased to note the announcements issued today by Aberdeen UK Tracker Trust plc and BlackRock Income Strategies Trust plc, regarding the two investment companies merging to create an enlarged company with approximately £500 million[1] of assets under the management of its Diversified Multi-Asset team led by Mike Brooks and Tony Foster.

The Boards of the two companies and Aberdeen Asset Management have agreed heads of terms for the proposals which will be put to shareholders in March 2017, with the ongoing vehicle being re-named as the Aberdeen Diversified Income and Growth Trust plc (the “Company”).

Key characteristics of the enlarged Company:

  • A truly diversified multi-asset income and growth portfolio aiming to provide a total return of LIBOR +5.5%, net of fees, over rolling five-year periods
  • Attractive income with expected volatility well below that of equities
  • Managed by experienced managers with a strong track record of performance in diversified multi-asset investing
  • Highly competitive management fees[2] charged on net assets and an OCF which will be amongst the lowest in its peer group

This is a truly diversified approach aiming to generate attractive long-term income and capital returns with lower volatility than equity markets. It builds on the experience and success of the managers with similar open-ended portfolios but with the added benefit of accessing a broader range of less liquid investments that can significantly enhance return and income generation. It also fully harnesses the breadth and depth of Aberdeen’s resources across a wide range of traditional and alternative asset classes. This includes, but is not limited to, listed equities, property, social and renewable infrastructure, emerging market bonds, loans, asset-backed securities, insurance-linked securities, private equity, farmland and aircraft leasing. The breadth of this universe allows the team to fully harness the benefits of diversification and should provide a solid foundation for delivering the Company’s investment objective.

The managers will not be tied to a benchmark mix of assets and this flexibility, together with the breadth of opportunity set, will enable them to add value by taking advantage of the most attractive investments at any point in time; it should also lead to smoother returns in times of market stress.

Martin Gilbert, Chief Executive Officer of Aberdeen Asset Management said: “This is a significant development for Aberdeen’s closed end fund business and multi-asset offering. We have invested heavily in, and are committed to developing, a world class multi-asset business and currently have £90 billion under management. This appointment will take our diversified multi-asset offering to over £1 billion and we continue to be encouraged by strong interest from institutions and consultants.”

William Hemmings, Head of Closed-End Funds at Aberdeen Asset Management, comments: “We are pleased to have been able to offer a solution to the Boards of both companies. Most importantly though, we believe that combining the two companies is beneficial to all shareholders. The enlarged Company will be of a much greater scale and offer investors a highly diversified multi-asset portfolio paying a quarterly income.

“We believe that, longer term, a diversified multi-asset income and growth portfolio within a closed-end structure is likely to appeal to a broad range of investors looking for consistent delivery of income and total returns.”

Mike Brooks, Head of Diversified Multi-Asset at Aberdeen Asset Management, comments: "Investors are looking for consistent performance from their investments, multi-asset investing is a good base from which to deliver that but many portfolios are too dependent on simple equity and bond allocations. With ultra-low - and in a number of cases negative - government bond yields, strategies that rely heavily on government or investment grade bonds face a potential headwind of rising yields, rather than the tailwind of falling bond yields experienced over the last 25 years. Equity markets also face challenges and likely higher volatility given the risks in the world today – not least the uncertainty created by political change.

“The world’s largest investors no longer rely on just traditional equities and bonds – smaller investors don’t have to either. The Company will give investors access to the kind of diversified portfolio that is typically only available to the world’s largest, most sophisticated investors. This is delivered in an easily accessible vehicle with a highly competitive cost structure.”

Aberdeen has £90 billion of assets under management within multi-asset portfolios and manages 19 UK-listed closed-end funds.

Next Finance December 2016

[1] Based on current asset values and estimated full tender take-ups

[2] Proposed management fees charged at 50 basis points on the first £300 million of net assets and 45 basis points thereafter.




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