JP Morgan UK Small Cap Growth and Income (JUGI) and Aberdeen UK Smaller Companies Growth Trusts (AUSC) have agreed to terms for a merger, according to an announcement on the London Stock Exchange released today (18 September).

The resulting trust is expected to be managed by the JP Morgan team (Georgina Brittain and Katen Patel) in line with the existing investment strategy, with AUSC shareholders able to roll their investment into the enlarged trust or take a cash exit.

The announcement follows a “competitive private review process” by the AUCS board.

Katrina Hart, chair of JUGI, said: “This partnership will create an enlarged company that delivers meaningful benefits for both sets of shareholders, including improved market liquidity and a reduction in our ongoing charges ratio.”

Liz Airey, chair of AUSC, added: “I am delighted that we can offer our shareholders the opportunity to roll over their holdings into an investment trust with exceptional long-term performance within the UK smaller company’s sector.”

Subject to approval and necessary continuation votes, the merger is expected to finish by the end of 2026.

The two trusts have had very different experiences over the past decade, according to data from FE fundinfo. JUGI has delivered a 180.8% total return over the past decade, outpacing the Deutsche Numis Smaller Companies plus AIM index by around 115 percentage points, making it one of the top trusts in the IT UK Smaller Companies sector.

Aberdeen UK Small Companies Growth meanwhile has been through the wringer, delivering bottom-quartile returns over the past 10 and five years, and the past 12 months. In the past year, it is up just 0.6%, compared to a sector average of nearly 11%.

Richard Williams, senior analyst at QuotedData, responded positively to the move.

“This deal draws a line under the problems that have been steadily eroding AUSC’s viability as a standalone vehicle,” he said. “Over the past five years, the trust has more than halved in size through share buybacks intended to control its discount, leaving it with reduced liquidity and an increasingly burdensome cost base – a vicious circle that was becoming difficult to break.”

For shareholders, this represents a relatively clean deal, he noted, and brings other benefits such as JUGI’s 4% of NAV approach to dividends.

However, Williams said the bigger story here might be JUGI’s efforts to become an investment trust consolidator, with this move marking the second merger from the trust in recent years, after having absorbed its stablemate JPMorgan Mid Cap in 2024.

“If greater scale translates into better liquidity and a more resilient rating, it may not be its last deal,” he noted.

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