Clients of Baillie Gifford’s £145mn Keystone Positive Change investment trust could be waiting months to get their money back, as the fund begins to wind down.
Investors have been presented with two options, they can either roll their investment into an open-ended fund run by the same company and individuals - Baillie Gifford Positive Change - or they can receive cash for their investment minus the cost of winding up the trust.
The cost of winding up a trust could be as high as 2p per pound of assets, so a client with £100 invested would receive £98.
However, in the case of the Baillie Gifford Positive Change investment trust, there is a further restriction.
The trust has about 4.5 per cent of its assets in unquoted assets which, in a recent stock exchange announcement, the company said would be unlikely to be sold and turned into cash prior to the trust being wound up.
That means whichever of the options clients choose, they will have a portion of their investment stuck. So, instead of receiving the £98 mentioned above, they will receive £98 minus the 4.5 per cent.
They will only receive the value of their portion of the 4.5 per cent after the assets are sold, which Ian Scouller, managing director at investment bank Stifel, said will take “some time".
It should be pointed out that in the immediate aftermath of the announcement, the trust’s share price rose, narrowing the discount.
The logistics of what happens next have been outlined for FT Adviser by Karen Brade, the chair of the trust.
She said that, subject to approval from shareholders at an extraordinary general meeting (EGM) early next year, liquidators will be appointed to run the trust, the assets of which will be the unquoted holdings worth less than £10mn.
Once a liquidator is appointed, she said: “The company will continue to exist and hold assets but be in liquidation and managed by the liquidator. As is the case with other investment trust liquidations it is expected that the shares will remain eligible to be held within Isas during the period of liquidation.
"However trading on the London Stock Exchange will be suspended following shareholder approval for the liquidation.”
During this period of liquidation, investors will not be able to sell their shares. The liquidation process can only end when the unquoted assets are sold, and then the cash distributed.
Baillie Gifford will try to sell the unquoted assets as well as the quoted assets between now and the date of the liquidation.
The board of the trust are anxious to avoid being forced sellers of the assets, that is, selling quickly to get the client's capital back, and so having to accept lower prices.
While the trust is combining with an open-ended fund run by the same people as who delivered underwhelming performance for the trust, Brade says a process was run which enabled rival firms to seek to run the assets.
