Standard Life Aberdeen trusts to merge to create £550m fund

The £159m Dunedin Smaller Companies Investment Trust has agreed in principle to merge with Standard Life UK Smaller Companies Trust following a strategic review by the smaller fund.

The move was revealed in a stock exchange announcement which reported that the board of Dunedin came to the decision to join forces with the Harry Nimmo’s £400m vehicle as a result of finding it “challenging to attract new investors”.

Together, Standard Life UK Smaller Companies Trust and Dunedin Smaller Companies Investment Trust would have more than £550 million of assets under management following the proposed deal.

The much-bigger Standard Life trust would bring £400m of those assets to the merged entity, while its prospective counterpart would bring around £160m.

Both trusts are run by Edinburgh-based Standard Life Aberdeen since that firm’s creation following last year’s £11 billion mega merger of Standard Life with Dunedin manager Aberdeen Aberdeen Asset Management.

The merger announced this week is said not to be as a direct consequence of last year’s Standard Life and Aberdeen Asset Management tie-up, but that deal was certainly a catalyst for the Dunedin board to carry out a strategic review.

In an announcement to the London Stock Exchange, Dunedin outlined the result of that review and said it felt the two trusts were now very similar following the last year’s merger and it expects a merger of the two funds to result in a “significant increase” in the trust’s valuation.

The combined trusts will continue to be run by Standard Life fund management veteran Harry Nimmo, who is said to have delivered “some spectacular returns for shareholders over the last 15 years”.

For the year ended June 30, 2017, the company delivered a diluted net asset value (NAV) total return of 35 per cent, compared with a total return of 29.1 per cent for its benchmark Numis Smaller Companies ex Investment Companies Index.

Shares in the Dunedin trust rose nearly eight per cent to 308p on news of the merger.

The deal would be only the second merger undertaken by the Standard Life UK Smaller Companies Trust in a decade, after it took over the £40m Gartmore Smaller Companies trust in 2008.