Weekly wrap: Aurora & Artemis Alpha merger & more

After a quiet end to the summer in the investment trust world, there are a couple of developments worth reporting this week.

Aurora and Artemis Alpha to merge

Aurora, a ‘value’ fund, and Artemis Alpha, a ‘best ideas’ trust, have announced plans to merge. If shareholders approve the deal, Aurora will absorb Artemis Alpha’s assets and the latter’s investors will receive new shares in Aurora. The two portfolios have a number of holdings in common. The enlarged trust, renamed Aurora UK Alpha, is expected to have a lower ongoing charge and to be more ‘liquid’: more of its shares will be available to buy and sell each day.

Artemis Alpha shareholders will have the option to cash in some of their stake at net asset value minus 2%; they will also pay an ‘illiquidity discount’ of 20% of the value of the unquoted part of Artemis Alpha’s portfolio that transfers to Aurora. Up to 25% of the trust’s shares can be redeemed for cash in this way. Shares in Artemis Alpha currently trade at a discount of 6.6% to net asset value.

Kartik Kumar, the fund’s lead manager, has accepted an offer from Phoenix to join its investment management team later in the year.

PRS Reit faces investor rebellion

PRS Reit has come under pressure from investors who want to force a general meeting and bring about board changes.

Shareholders who speak for about 17.3% of PRS Reit’s shares want two current board members, including the chairman, to be replaced by their own nominees, one of whom is Christopher Mills, the veteran investor who runs the North Atlantic Smaller Companies trust.

The PRS board said it shared the frustration of the rebel shareholders and other investors over the discount and ‘a share price performance that does not reflect the strong operational performance and opportunity of the business’. It said it would seek to meet the rebels and to find a resolution in the interests of all investors.

Ten more years for Venture Capital Trusts (VCTs)

The legal framework that allows venture capital trusts to offer their tax breaks has been extended until 2035. The European Commission has to approve the tax perks periodically under state aid rules that survived Brexit. VCTs channel money to immature companies that would struggle to raise funds elsewhere.

Investors who buy VCT shares at issue (and not from another investor via the stock market) can get a 30% rebate on their income tax bill. Shares must be held for at least five years to qualify. Dividends and capital gains are also tax-free.

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