Where next for Gartmore Growth following Williams departure?

One of the more notable events in the sector recently was Gervais Williams’ departure from Gartmore.

The board of Gartmore Growth have acted promptly in serving a 12-month protective notice. This will help expedite the appointment of a new manager; this could be Gervais at another investment house, should the board feel that this is appropriate. After all, he has a long and enviable track record despite lagging the peer group over the past year.

The Gartmore Growth board, led by David Peters until, sadly, he died this May, has been more proactive than most in the sector. Back in 1999, in advance of a continuation vote, they opted to split the fund into two pools, one managed by Gervais on an active basis and the other an index-tracking loan stock.

I tried to get them to merge with Gartmore Smaller and offer a simultaneous tender but the largest shareholder of Gartmore Smaller was opposed to the idea, for reasons I could never fathom.

By 2005, with all the smaller company trusts sitting on wide discounts and arbitrageurs crawling over the sector, it was clear something had to be done and the Gartmore Growth board took the bold step of offering regular quarterly tenders at a 2% discount to the realisable value of the portfolio. Inevitably this caused some shrinkage of the trust but it stood them in good stead when they were able to offer Eaglet shareholders a rollover into the fund.

It should have made them the logical merger partner for Throgmorton but that board opted instead for BlackRock, a truly dreadful deal for Throgmorton shareholders as it turned out. The board supported Williams’ use of put options to protect the portfolio in 2007 and 2008 and this boosted returns, encouraging new investors to come into the trust.

With a market capitalisation of £50 million, the trust is just about large enough to carry on but some shareholders may now be looking for an exit. It would be a shame to see another trust disappear (since mid 2005 the sector has almost halved both in assets managed and the number of funds) but if the board is considering a merger, the most sensible partner is probably Standard Life Smaller Companies, which has a similar approach to discount control and a decent track record.