This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

When is a concert party not a concert party?

The views expressed in this article are those of the author, not necessarily those of ShareSoc.

Today’s RNS from GHE (Gresham House plc) who own Gresham House Asset Management (GHAM) highlights the issue of who runs the company and on whose behalf are they running it. see https://www.londonstockexchange.com/news-article/GHE/ghs-egm-requisition-update/15178071

In May 2021, GHS (Gresham House Strategic) directors undertook a strategic review and issued a precautionary termination notice to GHAM (this is something we criticised the Edge Performance VCT directors for failing to do early enough, readers may recall). The issue is full of conflicts as 28% of GHS is owned by GHE (including about 6% owned by the managers). The lead fund manager Richard Staveley left GHAM earlier this year and this may have been one of the reasons for the review and the subsequent appointment of Harwood Capital as the new fund manager.

However, the Board of directors decision to remove GHAM is not well liked by some. The GHAM contract to manage GHS was a bit of a gravy train for GHE and even more so for the managers in GHAM. The new deal has much lower management and performance fees. I think the new level of fees is much more reasonable compared to the previous egregious levels and congratulate the GHS directors on this achievement.

The resolutions from GHE calling an EGM are planned to unwind the directors’ decisions.

GHE claims it has the support of others “five of GHS’ top seven institutional shareholders”, but refuses to name them or produce evidence to confirm this.

If a group of shareholders get together to try to undo directors’ decisions and try to unseat existing directors and appoint their own appointees, this looks to me like there are trying to seize control of the company. It looks to me like a duck, it waddles like a duck, it quacks like a duck, so it ought to be treated as a duck. Is this not one for the Takeover Panel to look at and tell this group of shareholders to desist or make an offer for the whole company?

ShareSoc is concerned about egregious pay in investment trusts and also issues of independence and long tenure of directors. In this case, GHS directors appear to have done the right thing. What is more, they are setting a very good example for directors in other companies to follow. If GHE and their “mates” are allowed to undermine the good actions of the directors, it would set an abysmal precedent for others – it could easily lead to higher and higher fees for managers and see the rewards too much in their favour and so make much of the sector uninvestible.

Many individual shareholders will not want to receive cash for their shares – many would incur a capital gains tax bill and lose money as a result.

I shall watch developments with interest. I ask shareholders to add comments below or get in touch with me.

Other recent articles on investment trust discounts and fees are:

https://www.sharesoc.org/blog/collective-investments/investment-trust-discounts-what-to-do-about-them-and-sec-example/

https://www.sharesoc.org/blog/shareholder-democracy/investment-trust-discount-reduction-the-sec-example/

Cliff Weight, ShareSoc Director

DISCLOSURE:  I own shares in GHS (and SEC and Baronsmead and Mobeus) . I used to own shares in GHE but sold them recently.

2 Comments
  1. Edward says:

    GRESHAM ARE NOW ISSUING NEW SHARES IN SOLAR DISTRIBUTION LLP AND THE NEW SHARES WILL BEAR 6% COMMISION
    why are commissions generally the best guide to cost and profit of Managers?

  2. rogerwlawson says:

    This looks like a simple case of being disgruntled over losing the management mandate. But if they have managed to get other shareholders to support them that does not mean there is a concert party necessarily. I experienced a similar situation some years ago when Aberdeen got involved in opposition to losing the management contract at a VCT. I thought it was quite unethical for them to intervene in the way they did and this looks a similar case.

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