Abrdn has proposed folding the New Dawn investment trust into Asia Dragon.
If the move is approved it would create a £700m ($898.7m) Asian equities focused entity.
The pair have a similar remit and a significant commonality of equities holdings. A merger could create efficiencies within the running of the trust and improve liquidity, according to abrdn.
The proposal is to liquidate New Dawn, transfer the assets to Asia Dragon and continue under that name.
The ongoing charge for investors would drop to 0.75% from the current 0.85%.
A circular to shareholders providing further details and convening meetings to approve the transaction are expected to be published in September. The proposals would become effective in October.
Chair of New Dawn, Donald Workman, said: “The combination of abrdn New Dawn Investment Trust with Asia Dragon Trust will provide additional scale and liquidity for continuing shareholders, whilst broadly retaining abrdn New Dawn’s existing investment policy.
“Both companies already benefit from a similar investment approach and management style within the same investment group. This additional scale and Asia Dragon’s tiered fee structure, combined with the reduced fee arrangements, will also result in a lower ongoing charges ratio for continuing shareholders.”
James Carthew, head of investment company research QuotedData, commented: “This has been a long time coming – in fact I have been arguing that the two funds should be merged since 2003 when Aberdeen took over Edinburgh Fund Managers, bringing Edinburgh Dragon, now Asia Dragon, into the Aberdeen stable.”
“The combination is good news therefore but there is still work to do. Lower fees and greater liquidity are welcome. However, ahead of this Asia Dragon was trading at a wider discount than abrdn New Dawn, 16.5% to 15.9%.
“I must also point out that Asia Dragon has underperformed New Dawn over all time periods and is the worst-performing fund in its peer group over 10 years by a sizeable margin.”
This story first appeared on our sister publication, Portfolio Adviser.
