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Discount on Buxton's trust hits six-year high after star announces Schroders exit
by Sarah Miloudi on Mar 20, 2013 at 07:00
The discount on Richard Buxton's closed-end fund has widened to its 2006 peak following the shock news that the star manager is quitting the firm.
Buxton (pictured) will join Old Mutual Global Investors in June, when he will head up the UK equities team and pick up the reins of his Old Mutual Equity 3 fund and run the vehicle internally.
Along with his £3.6 billion Schroder UK Alpha Plus fund - an identical Ucits unit trust to Old Mutual Equity 3 - Buxton also manages investment trust Schroder UK Growth, though it is unclear whether its board will put it out to tender or look to Schroders to appoint a replacement when the manager departs.
Alan Brierley, director of investment company research at Canaccord Genuity, said the trust's shares have taken the strain following Buxton's decision to quit.
'The shares have de-rated and the discount is now at its widest level since the formal discount management policy was introduced in November 2006,' he said.
But for holders of the trust, respected analyst Brierley advised sitting tight until it was clear what direction the board would take.
'We would avoid making an impulsive decision,' Brierley said, adding the same mantra holds true for tactical investors looking to trade while the fund is discounted 10.5%.
Perhaps surprisingly, Buxton's £274 million closed-end fund has often traded at a discount despite outperforming his far larger unit trust.
Its board took steps to address the vehicle's seemingly embedded discount back in 2006 when it announced a 5% long-term target.
According to Canaccord, the board of Schroder UK Growth has bought 12.2 million shares for cancellation since introducing this target, though the discount has still posed an issue.
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