Artemis has been appointed to take over Invesco’s underperforming Perpetual UK Smaller Companies (IPU ) trust in a coup for the boutique asset manager.

In an unexpected announcement, the £139m trust’s chair Bridget Guerin said the board had appointed Artemis’ Mark Niznik and Will Tamworth to take over in early 2025, persuaded by lower fees, their open-ended fund’s strong track record and their promise to invest their own money into the trust.

IPU’s shares softened 1% as the board announced that as well as waiving fees for the first nine months, Artemis will charge a management fee of 0.65% of net assets below £50m and 0.55% above, slightly below the current Invesco fee of 0.75% of gross assets, which includes borrowing.

The win marks Artemis’ return to the investment trust sector, having seen global equity fund Mid Wynd (MWY ) move to Lazard last year following Simon Edelsten’s retirement and, more recently, Artemis Alpha agree a merger with Aurora to become Aurora UK Alpha (ARR ). 

‘Having reviewed a variety of options, Artemis stood out as not only a top performer but also very enthusiastic about taking over the management of IPU,’ Guerin said.

‘To reinforce their commitment to managing the company, both fund managers and other staff members within Artemis have agreed to invest meaningful amounts of money into the fund. The board and managers are excited about the prospects for UK small companies, which are now trading at historically cheap levels.’

This morning’s announcement is not a complete surprise. Under Invesco fund managers Jonathan Brown and Robin West, the 4.4%-yielder’s performance had slipped, with five-year shareholder returns the worst in the trust’s 11-strong UK small-cap sector, Deutsche Numis data shows. The discount has hovered around 13% over the past 12 months and closed at 16% on Wednesday.

Over the five years to yesterday, shareholders have lost 22%, even with dividends reinvested, versus an 8.6% gain for the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) benchmark. By contrast, Niznik and Tamworth’s £453m Artemis UK Smaller Companies fund returned 18%, according to Morningstar.

Despite this, there has been no obvious sign of shareholder discontent, with 93% of investors giving the thumbs-up at a continuation vote in June.  Nor did the board indicate it was reconsidering Invesco as manager in recent months through a formal strategic review.

Yet the change marks a significant development for the trust at a time when the sector is seeing significant corporate activity, Peel Hunt’s Anthony Leatham said.

‘The adjusted fee terms and fee break are likely to be well received but we are not yet able to determine what the key differences are likely to be between the trust and open-ended fund portfolios going forward,’ he said. 

The Artemis managers will be able to use the closed-end structure in several ways, including through gearing and investing in illiquid companies, to differentiate the trust from their open-ended fund.