Miton UK Microcap (MINI ), the smaller companies investment trust run by veteran stock pickers Gervais Williams and Martin Turner, has announced it is winding down after investors used its annual redemption facility to rush for the exit.

The closed-end fund was left with just £23m of net assets last month after shareholders sold 40% of their shares at a narrow discount, prompting the board to ‘engage with shareholders with regards to the future direction of the company’ and conclude that it is in their best interest to ‘put forward proposals for a voluntary winding up’.

The board, chaired by Ashe Windham, said it had started discussions with manager Premier Miton to wind up the company by rolling investors over into one of Premier Miton’s open-ended funds.

‘Should the scheme be put forward, it is expected that a cash exit alternative will also be offered,’ it said.

‘The winding up of the company will be subject to shareholder approval and further announcements will be made when appropriate.’

Although there was no detail on which fund shareholders could be rolled into, Williams and Turner also run the £46m Premier Miton UK Smaller Companies fund.

UK small caps have had a tough time in the past three years as investors have reduced their home weighting in favour of US and global investments.

MINI has found the environment particularly tough and over the past three years has fallen to the bottom of its sector after its net asset value (NAV) was cut by nearly 50% and its shares lost half their value.

This has left the trust trading at a ‘persistent material discount’, said the board, ‘with limited options to grow and achieve greater scale’. It currently sits at a discount of 11.6% and has averaged 9.9% over the past 12 months, with a discount high of 17.5%.

The board said that while there was support for the trust and its manager, ‘it was acknowledged that the company has been through a challenging period of performance and following this year’s redemption, the company is now at a size which some investors consider to be too small from a liquidity perspective, particularly given the increasing demand from investors for larger listed funds’.

The top shareholder is Investec Wealth & Investment with a 13.7% stake, followed by West Yorkshire Pension fund at 13.3%, and CG Asset Management at 8.46%

Peel Hunt analyst Anthony Leatham said it was a ‘shame to see this conclusion, particularly at a time when other micro-cap strategies are performing well’, with a sector average year-to-date share price return of 13%.

The closure of MINI means the sector will be left with four trusts with a market cap of more than £50m; Odyssean (OIT ), on a 3% discount, Strategic Equity Capital (SEC ) at 9%, Rockwood Strategic (RKW ) on 1%, and River UK Micro Cap (RMMC ) on a 14% discount.

MINI launched in April 2015, raising £50m through the issue of shares at 50p and subsequently grew through a series of secondary issues. However, it has suffered significant redemptions in recent years as UK smaller companies fell further and further out of favour.

Ash Nandi, an analyst at Deutsche Bank, said Williams and Turner were ‘highly-experienced’ managers who had to deal with a ‘difficult time for micro-caps, particularly post-2021 given the selloff in growth companies and outflows from UK smaller companies funds’.

Nandi said the rollover into an open-ended fund ‘may be attractive for people who wish to maintain exposure to the asset class, given the micro-cap portfolio may take some time to sell assets’.