Gartmore trust cuts borrowing and manager notice period

The board of the Gartmore Irish Growth investment trust has declined to renew its borrowing facilities and cut the notice period of its new managers after they replaced Gervais Williams in September.

The board says it has shortened its notice period for Adam McConkey and Moni Sternbach, the new managers, from one year to a rolling three months.

Williams, their predecessor and the head Gartmore’s UK smaller companies team, had managed the trust since launch and caused a stir with his departure this year.

Williams deployed flexible borrowing facilities to give the trust the ability to gear itself up. But following the recent turbulence in banking markets in Ireland and other countries, the trust did not renew its borrowing facilities as “the terms offered were unacceptable”.

Instead, the board has authorised the managers to use contracts for difference for gearing purposes. Those are subject to the limits which applied when bank loan facilities were used. (article continues below)

The board will continue to monitor the two new managers and their investment management, against the backdrop of a potential restructuring or sale of the group.

“Further departures from Gartmore, although not directly associated with the company, have required the board to examine the arrangements with Gartmore as investment manager,” the board says in a statement.

The Gartmore Irish Growth fund is still trading on a discount, although this has narrowed over the past couple of months. Its share price amounted to 670p at the end of September, representing a discount to net asset value (NAV) of 11%.

In sterling terms, the NAV amounts to 755.62p, a decrease of 4% over the six months to September 30. The 4% decrease compares with a decrease in sterling terms of 18.2% in the ISEQ Index.

Revenue return for the six months to September was 3.74p per share, representing an increase of 34% on the revenue return of 2.80p for the six months to September last year. This improvement reflects strong dividend income on the underlying investment portfolio.

“We remain cautiously optimistic about the prospects for selected Irish equities, which continue to benefit from a strong export performance and their international activities,” the board says.

“There are still many opportunities at a stock specific level to invest in strong, growing businesses that have an ability to generate profits and dividends.”

Ireland’s deteriorating economic and financial prospects have also created challenges for the managers. McConkey and Sternbach are, according to their mandate, authorised to gear the portfolio to make additional investments.