Merryn Talks Money — "Why This Controversial Investment Trust Deal Has Riled Key Shareholders"

Date: November 21, 2025
Host: Merryn Somerset Webb (Bloomberg)
Co-host: John Stepek
Guest: Chris Clothier (Capital Gearing Asset Management)

Episode Overview

This episode digs deep into a contentious merger proposal between two UK-listed infrastructure investment trusts, HICL Infrastructure (HICL) and The Renewables Infrastructure Group (TRIG). Guest Chris Clothier, who has publicly objected to the deal, explains the structure, shareholder backlash, and broader implications for the UK investment trust sector. The discussion also covers current market sentiment, house prices in London, and looming UK budget rumors.

Main Discussion: The HICL/TRIG Merger Proposal

Background to the Deal

• Participants: HICL (core infrastructure assets) and TRIG (renewable infrastructure), both managed by InfraRed Partners
• Proposal: Merge the two trusts, combining traditional and renewable-focused portfolios

“There are two infrastructure investment trusts. … The first is HICL, which has been on the market since 2006, a well loved core infrastructure fund. And then there is a second which is TRIG ... Now they're both managed by the same fund manager, Infrared Partners, and they have proposed merging the two vehicles together.”
— Chris Clothier (03:03)

What HICL Owns (Core Infrastructure)

• PFI contracts (hospitals, schools)
• Toll roads
• Water sector investments
• HS1 High Speed Rail concession
  (03:57–04:16)

What TRIG Owns (Renewable Infrastructure)

• Wind farms
• Solar assets
• Increasing presence in battery storage, in the UK and overseas
  (04:22–04:37)

Why Are Both Trading at a Discount?

• All such trusts are "bond proxies." Rising interest rates have pushed discounts wider.
• Investment trusts out of favor: more sellers than buyers.
• Structural concerns: Unlike open-ended funds, trust share supply is fixed in short term.
• Renewables trusts hit especially hard:
  • UK government’s extraordinary profit levy post-Ukraine invasion.
  • Asset valuations questioned (can't sell at book value).
  • Policy uncertainty: potential retrospective subsidy changes in the UK.
  • Renewables have less predictable returns—exposed to energy prices and weather, higher discount rates now demanded by investors.

“Investors…have come to realize that [renewables] are a less certain proposition and therefore require a higher discount rate.”
— Chris Clothier (06:43)

Shareholder Anger Over the Merger Structure (07:15–11:10)

Key Grievances:

• Core infrastructure shareholders forced into renewables exposure they never wanted.
  • “If I had wanted to own it, I would have bought it, and I bought something else instead.” (Chris, 08:21)
• NAV-for-NAV basis ignores market realities:
  • HICL at a 22% discount; TRIG at a 33% discount pre-deal
  • HICL holders effectively pay a premium to bail out TRIG
• Trig shareholders can cash out at a 10% discount—far better than market price
  • HICL holders have no such option
• Result: Trig holders “bailed out at the expense of HICL shareholders”

“This deal has destroyed value. … We only own Trig and we're completely delighted because it seems like we're being bailed out at the expense of HICL shareholders.”
— Chris Clothier quoting a client (10:14)

Why Is This Happening?

• InfraRed managers avoid losing management contracts; both trusts’ assets stay in-house.
• Trig facing a likely failed “continuation vote” due to persistent discounts; merger circumvents this.
  • “Continuation vote is almost certain to be triggered next year… If you were a cynic, you would say this transaction means they can avoid that…” (Chris, 11:32)

What Can Shareholders Do? (12:37–14:10)

• Upcoming votes (December)
• Clothier urges all shareholders (retail and institutional) to contact HICL’s board—every voice counts.
• Actively building a coalition of opposed shareholders

“Being shareholders is a democratic activity. … We would love to hear from you. And even if you like the deal, we'd love to hear from you as well.”
— Chris Clothier (13:16)

Broader Sector Implications

More Mergers, Votes, and Activism on the Horizon (16:41–17:16)

• Investment trusts sector “in the doldrums”
• Clothier warns: sector-wide actions coming to reduce discounts
• Importance of defending shareholder choice and fair deal structures

“One of the things you might be trying to do here is to try and make sure that any that come after this pay more attention to what shareholders might think.”
— Merryn Somerset Webb (17:06)

Preferred Consolidation: Not All Mergers Are Bad

• Would support NAV-based merger between HICL and another core infrastructure trust (e.g., INPP)
• Reducing supply (mergers, buybacks) necessary for repairing discounts over time

Scale: Is Bigger Better? (18:16–19:08)

• Merger could move combined trust from FTSE 250 to FTSE 100
• Chris: profile boost isn’t worth sacrificing investment mandate integrity

“My argument would be that… if the aim is to create scale, there are far better mergers out there that could be done.”
— Chris Clothier (18:32)

Some Institutional Investors May Need to Sell

• Example: Australian investor may have to exit because combined portfolio no longer fits their mandate

Market Roundup & General Macro Chat

General Market Sentiment (19:20–20:56)

• Recent broad sell-off may be a correction after extended overvaluation
• “Cyclically adjusted PE” in the 99th percentile—forward returns likely modest

“We think that markets are pretty, pretty expensive here.”
— Chris Clothier (20:56)

AI Boom, Depreciation & Capex Concerns (21:01–24:23)

• Discussion of investor nerves around AI capital expenditures
• Recognition that GPU depreciation might be understated—artificially boosting earnings
• Chris was early highlighting the depreciation risk (Praised by John)
  • “All this capital spending—what’s the depreciation going to be on that?”
• Worry: Private credit pouring into AI projects may not see adequate returns; risk of large write-downs

“A huge amount of private credit is being sunk into this great AI CapEx build out… who is left holding the baby when those revenues don't materialize?”
— Chris Clothier (23:06)

London Housing Market Swoon (24:23–26:03)

• Prices in wealthy areas (e.g., Kensington & Chelsea) plummeting
• Double council tax on top bands essentially a “mansion tax”
• Asset taxes dampen values and discourage new building (Merryn’s strong opinion)

Budget Rumors: What Could Change? (26:03–28:03)

• Rumored/floated policies: removal of tax reliefs, possible ISAs cap, changes to capital gains/inheritance tax interaction
• Complexity and voter/admin pushback likely stalling factors

“All these things… they don’t put an admin score next to it. Easy. Really, really hard. And that would come under really, really hard.”
— Merryn Somerset Webb (27:41)

Notable Quotes & Moments

• Chris Clothier (on the shareholder backlash):
  “We have been actively speaking to retail and institutionals since Monday. We've not come across one [supporter] yet. But that's not to say they don't exist.” (14:10)

• Chris Clothier (on market levels):
  “Historically… [the cyclically adjusted PE] has been a fantastic predictor of long term returns… and we're currently in the 99th percentile.” (20:56)

• Merryn Somerset Webb (on mansion taxes):
  “The worst of all taxes are these taxes on assets because they reduce the price of the assets...” (25:13)

Timestamps for Key Segments

• Deal Overview and Reaction: 03:03 – 11:10
• Shareholder Action Steps: 12:37 – 14:10
• Wider Investment Trust Sector Trends: 16:41 – 19:08
• Market Macro and AI Discussion: 19:14 – 24:23
• London Housing Market and Taxes: 24:23 – 26:03
• Budget Rumors & Tax Speculation: 26:03 – 28:03

Tone and Style

The episode is conversational, occasionally wry, and clearly opinionated—particularly about shareholder fairness, market froth, and inefficient or punitive tax policy. Chris Clothier provides the critical voice against the merger; Merryn and John facilitate, add color, and draw broader lessons for listeners navigating investments and uncertain market conditions.

This summary covers the core content and main takeaways for anyone seeking to understand the controversy over the HICL/TRIG merger, the broader state of UK listed investment trusts, and pertinent market and policy developments.