Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a657182

F&C trusts to merge due to 'significant change' in WM sector

by David Campbell on Feb 07, 2013 at 08:53

F&C trusts to merge due to 'significant change' in WM sector

The boards of ISIS Property trust and IRP Property Investments are seeking approval to merge the funds, in response to ‘significant change’ in the wealth management sector driving liquidity needs.    

Both funds are managed by F&C. The combination of assets to create the £130 million F&C UK Real Estate would ‘enhance liquidity in the shares’ and increase their appeal for wholesale buyers.

The combined trust would offer a dividend yield 30% lower than IRP and 20% lower than IPT as the board adjusted to reduced rental income however.

‘The UK wealth management sector is undergoing significant change, which is resulting in the creation of wealth management firms with significantly greater scale,’ said IRB chair Quentin Spicer.

‘This has consequent implications for the liquidity requirements for investments made on behalf of clients. The merger of IPT and IRP creates a larger and more liquid investment company which is a natural response to this trend.’

Both funds have suffered due to a limited market for their shares, with IRP currently trading at a 28% discount and ISIS at a 16% discount.

'It has been obvious for a long time (and especially following the 2007-2009 property crash) that these two companies should merge,' noted Dexion analyst Tom Skinner.

'Both are managed by Ian McBryde at F&C REIT, with similar portfolios and similar capital structures. However, the asset values of both had shrunk to levels at which they were too small to be relevant to a lot of investors.'

Adding additional scale will only answer one cause of investor reluctance to buy in, however. Last November Winterflood named the pair as the most likely to cut their dividends due to low capital returns and limited potential for capital growth.

‘Dividend cover remains an issue for a number of funds, and we would highlight IRP Property Investments and ISIS Property Trusts as the most likely contenders to have to cut dividends,’ the team said.

‘Although both have cover of around 75%, there appears little scope to grow income. Consequently, cover is more likely to fall in the near-term than grow.’

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

The Citywire guide to investment trusts

Investment trusts have proved to be a highly effective way to invest in the market. Citywire has interviewed the experts to find out more.

Investing for income in a changing environment


With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop

More about this:

Look up the shares

  • F&C Asset Management PLC
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the investment trusts

  • ISIS Property Trust (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • IRP Property Investments (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet