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If you’re keen to capture the potential offered by global investment markets, take a look at abrdn investment trusts. Managed by teams of experts, each of our trusts are designed to bring together the most compelling opportunities we can find to generate the investment growth or income you’re looking for.
Tap into abrdn’s specialist expertise across a wide range of different markets and investment sectors – both close to home and further afield. There’s plenty of choice to target your specific investment goals, whichever stage of life you’re at.
Please remember, the value of shares and the income from them can go down as well as up and you may get back less than the amount invested.
Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Eligible for Individual Savings Accounts (ISAs) and Self-Administered Personal Pensions (SIPPs).
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05 EDITOR’S VIEW
The Federal Reserve could be done with rate cuts
NEWS
07 Why rising bond yields are testing equity investors’ risk appetite
08 Oil price hits six-month high amid sanctions and cold weather
09 US wildfires could rank among the most costly natural disasters in country’s history
10 Anpario’s fifth full-year upgrade in a row feeds further gains
10 Greggs shares hit a 52-week low despite sales hitting £2 billion milestone
11 Is another upgrade cooking at Cranswick?
12 Can Netflix leverage mega live sports deals to drive growth?
GREAT IDEAS
13 Value investors should grab a slice of the action with Domino’s Pizza
15 Discover why the managers at MIGO Opportunities are so excited by the returns outlook
UPDATES
17 Another record year for ME Group International means we’re happy to stay buyers
18 ProCook continues to outperform the UK kitchenware market
FEATURES
20 COVER STORY
Investment trusts at crunch point
28 How the obesity drug market is evolving in unexpected ways as we enter 2025
31 ETFs
Discover the new quality ETFs which tap cash generative companies
35 FUNDS
Why are so many active fund managers underperforming?
37 DAN COASTWORTH
There are fewer AIM heavyweights as it hits 30 year anniversary
40 ASK RACHEL
How will I be taxed if I use my SIPP pot to buy an annuity?
43 INDEX
Shares, funds, ETFs and investment trusts in this issue




Three important things in this week’s magazine


Read why US activist Saba is targeting seven UK investment trusts

We explain the US manager’s demands, the investments trusts’ responses and how you can make your vote count at the upcoming general meetings.


Learn how the market for weight-loss treatments is evolving and what the major drug companies are planning next
After years waiting in the wings, obesity drugs have taken the healthcare industry by storm but what comes next?
Visit our website for more articles
Did you know that we publish daily news stories on our website as bonus content? These articles do not appear in the magazine so make sure you keep abreast of market activities by visiting our website on a regular basis.
Over the past week we’ve written a variety of news stories online that do not appear in this magazine, including:


Discover the new thematic products designed to give you low-cost exposure to ‘quality companies’ The last few months have seen the release of several new exchange-traded funds aimed at investors looking for higher-quality businesses.



The Federal Reserve could be done with rate cuts
Blockbuster jobs number seen as the ‘straw which broke the camel’s back’
Interest rates are back in focus. The UK is seeing its borrowing costs surge, as Martin Gamble explains in this week’s news section, and this has its own domestic causes, even if it also reflects similar moves in other sovereign debt.
The latest US jobs figures strongly hint that the Federal Reserve may hit pause on rate cuts for the time being.
The influential non-farm payrolls reading was notably higher than anticipated – a 256,000 rise comparing with the 164,000 that had been forecast, leading Bank of America’s US economics team to claim the Fed is done entirely with rate cuts for this cycle.
Describing the latest data as ‘the straw that broke the camel’s back’ they argue: ‘Inflation is stuck above target: in the December SEP [Summary of Economic Projections], the Fed not only marked up its base case for 2025 significantly, but also indicated that inflation risks were skewed to the upside. Economic activity is robust. We see little reason for additional easing.’
This feels significant. Most people have probably accepted we weren’t going back to a world of nearzero rates but to stay above 4% indefinitely would require an adjustment in most people’s thinking.
In fact, BoA have gone further and suggested there is even a scenario where the Fed might start rates higher again. ‘We think the risks for the next move are skewed toward a hike. Markets are still pricing 30-35 basis points of cuts this year. We see this mostly as risk premium, in case the economy weakens substantially.
‘In our view, the salient issue going forward will be the threshold for hikes. The bar is high since the Fed still thinks rates are restrictive. But hikes will likely be in play if year-on-year core PCE inflation exceeds 3% and/or long-term inflation expectations become unanchored.’
We may have a clearer sense of whether this is right when the Fed has its first meeting of 2025 at the end of this month.

As I guided we would in this column last week, we have devoted a good chunk of this week’s magazine to the Saba-saga in the investment trusts space, with the US hedge fund targeting several names and meetings to determine their destiny looming.
Trusts matter to us – we spend a lot of time writing about them because we think they can be really useful vehicles for investors. A key takeaway if you hold any of the relevant names is you really should participate in the votes on their future, whichever way you land. Otherwise, Saba’s takeover by stealth will essentially be waved through and you will have surrendered the opportunity to have a say. Read James Crux’s excellent piece for a full rundown on the background.
Peel Hunt notes Saba has declared positions in some 24 trusts, so this story won’t start and end with the seven which are already in its crosshairs. The broker comments: ‘If Saba is successful in one or more of its current activist strategies, this is likely to provide further firepower for it to build dominant shareholdings in other trusts for similar activist campaigns – which could result in the closure or merging away of strategies at an inopportune moment.’
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Why rising bond yields are testing equity investors’ risk appetite
American novelist Ernest Hemmingway coined the phrase ‘gradually then suddenly’ in his 1926 Novel The Sun also Rises, and that seems an appropriate description of investor’s reaction to rising bond yields.
UK 10-year bond yields sit just shy of 5% compared with close to 4% in the middle of October, to reach their highest level since October 2007, on the eve of the financial crisis. This is higher than the spike during the disastrous Liz Truss mini Budget in September 2022.
It would be wrong to label the current rise in yields as apurely UK phenomenon as the same trend has unfolded to varying degrees across US and European bond markets. What does it mean and why is it happening?
Investors seemed unfazed by the rise in yields at the back end of 2024, but suddenly they are worried. This can be seen in the sharp underperformance of small- and mid-cap companies due to their greater

sensitivity to higher costs of borrowing.
Over the last month the FTSE 250 index has dropped almost 6% compared with a 1% fall in the blue-chip FTSE 100 index. It is the same story across the pond where the small cap Russell 2000 index has lost around 8% compared with a 4% fall in the S&P 500.
The why is harder to fathom. US bond markets tend to have a big influence on global bond markets, so that is a good place to start looking for answers. The December Federal Reserve meeting has changed the rate outlook substantially.
The Fed’s latest summary of economic projections saw the number of rate cuts halve to two this year from the four expected in September. Markets subsequently repriced expectations for the US rates upwards to around 4% in 2025 from under 3%.
Not helping matters, December’s non-farm payrolls (10 January) surprised to the upside by a wide margin with 256,000 jobs created compared with 165,000 expected, suggesting the US economy remains resilient.
Any suggestion that sticky inflation is pushing up interest rates does not chime with measures of medium-term inflation expectations which appear well anchored around 2.4%.
That said, it is worth investors keeping an eye of services inflation which has remained elevated relative to producer prices.
The most likely explanation for rising bond yields in recent weeks is investors demanding higher long term interest rates to compensate for greater uncertainty.
Uncertainties around president-elect Donald Trump’s economic measures, wide budget deficits being run by the US, UK and European governments and the high and rising levels of national debts are all causes of concern for bond investors. [MG]
Oil price hits six-month high amid sanctions and cold weather
Surge in crude and natural gas could add to inflationary pressures
Oil prices have hit a six-month high amid cold weather and new US sanctions on Russian sales of crude.
This is not entirely bad news for the FTSE 100 given the heavy weighting of oil giants BP (BP.) and Shell (SHEL) in the index, but not for nothing is oil known as a tax on economic growth.
Higher prices are likely to feed into higher inflation, which will only reinforce assumptions about interest rates staying higher for longer – a dynamic currently reflected in bond market moves.
The Biden administration’s sanctions target Russian oil companies Gazprom Neft and Surgutneftegas and blacklist 183 tankers shipping to India and China.
This is expected to push the world’s largest oil consumers to seek supplies from the Middle East, Africa and the Americas.
Natural gas prices are also trending higher amid freezing temperatures and reports of disruption to supply infrastructure.
Cavendish analyst James McCormack says: ‘While the market had been anticipating additional sanctions on Russia, the potential scope of the restrictions was unclear, and targeting a large

number of tankers threatens to significantly constrain the nation’s ability to access vessels.
‘Traders had also been bracing for tougher sanctions on Iranian oil, which would tighten a market already facing dwindling US stockpiles. The tighter fundamental picture, alongside the cold weather and lower Russian seaborne exports, has buoyed the recent rally.’
McCormack notes hedge funds have become increasingly bullish on crude in recent weeks with net long positions in the Brent benchmark at their highest level in eight months.
The strong start to 2025 for crude goes against the predictions of some in the market that a significant supply glut would weigh on prices.
However, analysts at US bank Goldman Sachs now argue in a research note that Brent crude prices may trend higher within a range of $70 to $85 per barrel.
The US bank estimates that the vessels affected by the new sanctions transported 1.7 million barrels per day of oil in 2024, accounting for 25% of Russia’s exports.
Analysts at RBC Capital Markets noted that the increase in tankers sanctioned for transporting Russian oil could present significant logistical challenges for future crude oil flows.
One sector this would be particularly bad news for is airlines and it was no surprise to see shares in this space come under pressure as a result of the recent strength in energy prices. [TS]
US wildfires could rank among the most costly natural disasters in country’s history
For now, UK insurers are believed to have avoided material losses
The wildfires which seemingly came out of nowhere and have devastated large communities in the Los Angeles area, destroying more than ten thousand properties, are reckoned to have caused total damage approaching $250 billion according to forecasting service Accuweather.
That would be equal to around 4% of California’s annual GDP and would make this one of the costliest natural disasters in US history, and it will intensify the focus on insurance firms, which in most cases have ratcheted up prices for fire risk but in more extreme cases have refused to issue cover altogether.
The insurers’ defence for refusing cover is that natural disasters are growing both in size and in frequency, while the cost of rebuilding properties has soared in the last few years making it uneconomic to write policies.
Although new rules in California require insurers to underwrite a minimum percentage of policies in high-risk areas based on their overall market share across the state, that is likely to force premiums higher still.
While the fires have destroyed some of LA’s iconic neighbourhoods, it isn’t just the elevated price of houses which has lifted the cost of rebuilding – many of the structures which have been destroyed are commercial or public, with a much greater value than residential properties.
According to Jefferies’ insurance specialist Philip Kett, calculating the insured loss is complicated by the fact there are fewer examples of wildfires than other natural catastrophes, such as hurricanes, so risk is not that well modelled, but for now most estimates seem to be converging on a range between $10 billion and $20 billion, equivalent to a small hurricane.
Assuming primary insurers incur losses in line with their share of the Californian market, says Kett, most of the losses would be retained in
Most costly US wildfires

the primary market, but there may also be some exposure through excess and surplus lines in the Lloyd’s of London market.
However, corporate loss is ‘unlikely to be material to earnings’, argues the analyst, which may explain why stocks such as Hiscox (HSX) and Lancashire (LRE) haven’t been hammered.
Hiscox reports full-year earnings on 27 February while Lancashire reports on 6 March, and we would expect both firms to comment on their potential exposure.
For Los Angeles itself, there is not just the physical damage to take into account but also the disruption to businesses including film and TV studios where work has been halted due to the fires.
The city faces a costly recovery and rebuilding effort, on top of the investment which will be needed to host the next Olympic Games in 2028. [IC]
Anpario’s fifth full-year upgrade in a row feeds further gains
The sustainable feed additives supplier has positive momentum and the cash to fuel market share gains
Shares in Anpario (ANP:AIM) are up a portfolio-nourishing 67% over one year, the latest upward spike triggered by a fifth upgrade in a row (10 January) to full-year 2024 guidance from the natural sustainable feed additives supplier.
Following a stronger-thanexpected second half, Anpario now expects revenue for the year to December 2024 to be £37.5 million implying 21% year-on-year growth.
Combined with the benefits of high operational gearing and favourable currency swings, this means adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) should come in ahead of the £5.7
million consensus estimate.
Anpario is profiting as food producers around the world transition to natural feed solutions and away from banned additives such as antibiotic growth promoters and as the safety and sustainability of global food production continues to increase.
The Nottinghamshire-based firm is winning market share and widening its moat, since competitors struggle to replicate its science-backed, patented products. The company’s second-half outperformance was broad-based, albeit largely driven by very strong growth across the Middle East and Africa and a continued recovery

across Asia, with recent acquisition Bio-Vet benefiting from greater product demand to support the health of dairy cows affected by avian influenza.
Year-end net cash of £10.5 million should enable the company to invest in innovative natural product solutions, expand its global reach and explore earnings enhancing and complementary acquisitions. [JC]
Greggs shares hit a 52-week low despite sales hitting £2 billion milestone
Lower consumer confidence and sausage roll ‘tax’ disappoint investors
The latest trading update from Greggs (GRG) saw the shares sink to a 52-week low.
Greggs said seasonal lines like its Festive Bake, the all-new Festive flatbread and Gingerbread latte were in high demand, while it opened a record 226 new shops in 2024.
So, what went wrong for the UK’s favourite food-on-the-go purveyor?
Despite solid sales, which hit the historic milestone
of £2 billion for the first time last year, Greggs’ chief executive Roisin Currie warned of lower consumer confidence which ‘continues to impact high street footfall and expenditure’.
Greggs also hiked prices last year, with its sausage roll costing hungry diners 30p or 30% more than it did in 2022.

These concerns and possible increased employment costs in 2025 post the Autumn Budget have clearly unnerved investors, although the bakery chain remains confident it can mitigate any future cost inflation.
This optimism is shared by Quilter Cheviot’s consumer discretionary analyst Mamta Valechha, who believes despite hiking prices the company has maintained its market share and protected its value proposition. [SG]
UK UPDATES OVER T HE NEXT 7 DAYS
FULL-YEAR RESULTS
17 Jan: Safestore
22 Jan: LBG Media
23 Jan: Nexus Infrastructure
TRADING ANNOUNCEMENTS
17 Jan: Bakkavor, Dunelm, Harbour Energy, Rathbones, Taylor Wimpey, Whitbread
20 Jan: Midwich
21 Jan: Kier Group, Premier Foods
22 Jan: EasyJet, Intermediate Capital Group, Wetherspoon

Is another upgrade cooking at Cranswick?
The pork-to-poultry processor is benefiting from its scale with the winners in UK grocery
Only a few more sleeps before we find out how Cranswick (CWK) fared over the seasonally-important Christmas period, with the UK food producer prepping its third-quarter trading statement for release on 21 January.
Shares believes the update could stoke another round of forecast upgrades, since Cranswick continues to profit from its strong relationships and scale with the current winners in UK grocery, among them Tesco (TSCO), Sainsbury’s (SBRY), Marks & Spencer (MKS), Lidl and Morrisons.
A FTSE 250 company with a longrun track record of tasty returns, the UK’s largest pig farmer continues to serve up robust growth in its most developed category, pork, as well as in poultry, where management continues to invest and analysts spy attractive long-term growth potential.
At the interims in November, Cranswick highlighted a ‘strong’ Christmas order book and said it expected ‘further progress’ in the second half, while endorsing the yearto-March 2025 consensus estimates which were raised in September.
Cranswick
Results for the first half to 28 September 2024 were nothing short of outstanding, showing volume-led revenue growth, up 6.1% to £1.33 billion, with broad-based revenue progress including a 16.4% uptick in poultry sales and 71% growth in pet food, reflecting the ongoing roll-out of Cranswick’s supply partnership deal with retailer Pets at Home (PETS). Adjusted pre-tax profit fattened up 17.4% to £95.8 million and Cranswick cooked up a 10.1% hike in the interim dividend to 25p, leaving the company on track for its 35th year of unbroken dividend growth.
‘Our continued positive progress is made possible by our industry-leading asset infrastructure, the unrivaled capability of our colleagues across the business, the breadth and quality of our product range and robust financial position,’ said chief executive Adam Couch. [JC]

Can Netflix leverage mega live sports deals to drive growth?
Streaming giant Netflix (NFLX:NASDAQ) made waves last year as it piled into live sports for the first time, inking blockbuster deals with WWE and the NFL, and viewers followed, adding 22.4 million net new subscribers as of the third quarter, its best year since 2020.
It helped seed an 85% share-price surge last year and shareholders are excited about 2025 prospects, as the company readies to report fourth-quarter and full-year 2024 results on 21 January.
The consensus expects Netflix to post $10 billion-plus of quarterly revenue for the first time, although earnings are likely to show the cost of its sports expansion.
The projected $4.20 of quarterly EPS (earnings per share) would be the lowest of the year, but there are hopes 2025 will bring more stability to margins.
Netflix, which last year overtook BBC 1 in UK viewing figures, is targeting 2025 operating margins
of 28%, a good deal higher than previous years as the company strikes a better balance between near-term margin expansion with business growth investment.
The Koyfin consensus has Netflix chalking-up revenues of $43.7 billion and $48.4 billion in 2025 and 2026, with a steep rise in EPS to $23.91 and $28.61, new record highs. [SF]
QUARTERLY RESULTS
17 Jan: Schlumberger, State Street
21 Jan: Charles Schwab, Netflix, Prologis
22 Jan: Abbott Labs, Freeport McMoran, J&J, P&G, ServiceNow, Travelers
23 Jan: Eastman Chemical, GE Aerospace, Intel, T Rowe, Texas Instruments, Union Pacific, Visa


Value investors should grab a slice of the action with Domino’s Pizza
The firm is ‘banking’ customers and market share with its discounted proposition
Domino’s Pizza Group (DOM) 270p
Market cap: £1.05 billion
We aren’t a willfully contrarian bunch at Shares, but now and then we come across a stock which seems so beaten-down with so much bad news priced in we just have to take a closer look.
A case in point is FTSE 250 fast-food firm Domino’s Pizza Group (DOM), the UK’s leading pizza brand with over 1,360 stores in the UK and Ireland.
Ironically, eight of the 10 brokers covering the company have a ‘buy’ or ‘strong buy’ rating on it, yet the shares have fallen to their lowest valuation on cyclically-adjusted earnings for over 20 years, which suggests there’s no love for the stock among investors.
NEW DEAL UNDERPINS TARGETS
Domino’s operates on a franchise basis, that is the company holds the rights to own, operate and franchise Domino’s stores in the UK and Ireland on behalf of brand owner Domino’s Pizza Inc (DPZ:NASDAQ).
If you run a successful business, franchising is a cost-effective way to expand as you don’t have to cover the cost of renting or buying a location, or of paying staff, so all incremental sales flow through into profit.
For the franchisee, they can run their own business using their local expertise while benefiting from the franchise owner’s brand recognition and customer loyalty as well as their purchasing power and ongoing business support.
Domino's Pizza (p)
relationship with its franchisees in the past, but in December 2024 the firm announced it had reached a new five-year framework with its franchise partners ‘to capitalise on its significant long-term opportunity’.

Specifically, the company said the new deal underpinned its confidence in its targets of 1,600 or more stores delivering £2 billion of system sales by 2028 and 2,000 stores delivering £2.5 billion of sales by 2033 ‘driving profit growth across the system’.
Domino’s hasn’t always had the greatest
Under the new arrangement, the group’s marketing spend –which is largely funded by a small levy on franchisees’ sales – will be increased with a particular focus on digital ad campaigns and the Domino’s app, which is used by 9.5 million customers, while there are new incentives for franchisees taking on territories with a lower address count and a new food rebate mechanism to increase like-for-like orders during campaigns.
Chart: Shares magazine • Source: LSEG
IMPROVED TRADING
At the half-year stage, the firm said it had seen a ‘notable improvement’ in orders from the middle of May 2024, with deliveries ‘stable’ after 10 consecutive quarters of decline and with momentum continuing through June and July, helped by the England football team’s good performance in the Euros, although it said the market was still ‘uncertain’.
While it anticipated some food cost deflation this year, it decided to pass on a greater level of savings to franchisees in the second half, to help drive volume growth and market share, meaning full-year EBITDA (earnings before interest, tax, depreciation and amortisation) would be at the lower end of the range of market expectations.
By the time of the third-quarter update, the firm said it was seeing accelerating growth in delivery orders and a return to positive like-for-like sales, which was continuing into the fourth quarter, meaning underlying sales were improving not just thanks to the Euros.
‘Total third-quarter orders were up 3.5%, with great strengthening in delivery orders of 6.6%, which I am really proud about,’ said chief executive Andrew Rennie on the conference call with analysts.
Collection orders were ‘down a bit’ due to customers switching to delivery, but ‘we are getting more order count growth, which is what we want,’ explained Rennie.
‘We are focused on growing our like-for-likes in a sustainable way, and I think the key word here is sustainable, driven by order count growth, not pricing, meaning lower ticket prices for customers and sustainable like-for-like sales growth driven by volume. So real growth, real core growth.’
Rennie said the aim for 2024 was ‘to bank customers, because we know with what is coming
Current and forecast outlets and
Consensus forecasts for Domino's Pizza
Financial year-end December, Share price: 270p
Table: Shares magazine • Source: Stockopedia
next year there will have to be a bit of price taken. However, we have actually been able to bank the customers before that happens, unlike a lot of others.’
Crucially, in the first five weeks of the fourth quarter – which included the run-up to the Budget and the immediate aftermath – sales were up nearly 6% on a like-for-like basis, and the company confirmed EBITDA would be in the revised range of expectations.
IMPROVING SHAREHOLDER RETURNS
At the half-year stage, the firm announced a 6% increase in the interim dividend to 3.5p per share and a £20 million buyback ‘reflecting confidence in future prospects’.
With a market capitalisation of £1 billion, a £20 million buyback represents an automatic increase in EPS (earnings per share) of a little more than 2% which isn’t too shabby.
Since March 2021, Domino’s has returned £461 million or around 46% of its current market cap to investors through dividends and buybacks, and thanks to its cash-generative, asset-light model – and with the added benefit of its new agreement with franchisees – there is no reason to believe it can’t continue to grow shareholder returns.
The key is overcoming negative investor sentiment – we weren’t surprised to see the shares slump on 9 January when Greggs (GRG) was punished for reporting weak like-for-like sales, even though Domino’s is bucking the trend. [IC]
Discover why the managers at MIGO Opportunities are so excited by the returns outlook
The managers look for opportunities where asset values are increasing and there is scope for discounts to narrow
MIGO Opportunities
(MIGO) 352p
Market cap: £71.25 million
Discount to NAV: 4%
With many investment trusts trading at deep discounts to NAV (net asset value), a great way to exploit the potential for discounts to narrow is by investing in specialist closed-end fund investor MIGO Opportunities Trust (MIGO).
The company has a unique mandate within the sector aimed at exploiting pricing inefficiencies at trusts which may have dropped off the radar of other investors. The trust also invests in specialist asset classes with a low correlation to equity indices.
Co-managers Nick Greenwood and Charlotte Cuthbertson argue the investment companies sector is ‘wildly dislocated from fundamental value’ with the potential for increasing corporate action to act as a catalyst to crystalise value.
The managers believe the returns outlook for the trust is ‘one of the best’ they have seen in the history of MIGO, resulting in the utilisation of gearing (around 8%) for the first time since 2020.
Company boards are engaging in high levels of corporate activity as highlighted by the 12 announced or completed investment company mergers in 2024.
Opportunities

return of 130.3% and NAV total return of 110.9%, outperforming the Numis All-Share index return of 78.2%.
WHAT IS THE INVESTMENT PROCESS?
The managers narrow down the investment trust universe into a shortlist comprising of trusts trading at a discount to NAV, which look credible, are not over-leveraged, operate in an asset class the managers like and where catalysts can be identified. They are essentially looking for unloved and overlooked stocks with hidden ‘gems’ which can be discovered through their in-depth analysis and company meetings.
This means the managers are finding many attractive opportunities with the average discount across the portfolio’s top 10 holdings sitting close to 30%.
MIGO has delivered a 10-year share price total
The shortlist undergoes due diligence and further research in order the nail down the best ideas for the portfolio. Positions are continually monitored, and every six months the team perform a ‘deep dive’.
MIGO creates a diversified portfolio of 45 to 55 positions while ensuring each is sufficiently large enough to contribute to performance.
Individual trusts rarely exceed 6% of NAV and a theme is capped at 8%. The managers think about the investment opportunity as a two-way bet. Firstly, an unloved trust can turn itself around with investors benefiting from the powerful dynamic of an increasing NAV and narrowing discount.
Conversely, a trust can continue to disappoint with shareholders taking control and expediting a vote for a windup, crystalising value.
It is worth illustrating the powerful effect of even a modest narrowing of a discount to NAV. For example, if NAV increases by 20% and the discount to NAV narrows from 40% to 30%, that equates to a 40% share price return.
Nick Greenwood has more than 25 years investment experience and has managed MIGO since 2004, when it was launched under a different name. Charlotte Cuthbertson has nine years finance experience with the last seven spent specialising in investment trusts at MIGO.
The co-managers also work together on the AVI (Asset Value Investors) Opportunities Fund, an openended version of MIGO.
AVI is an established fund manager with over £1.4 billion of assets under management and 40 years of managing investment trusts. The MIGO team benefit from AVI’s sector expertise and access to their 12 investment analysts.
WHERE IS THE TRUST INVESTED?
Around 40% of the assets are invested in equities including key themes such as biotechnology and uranium, with the remaining exposure spread across Property, Alternatives, Private Equity, Mining, and Leasing.
Listed private equity exposure is spread across traditional buyout funds such as Oakley Capital Investments (OCI), the third largest position in the fund at 4.5%, and NB Private Equity (NBPE).
The fund is also invested in growth-oriented private equity such as the Baillie Gifford-managed Schiehallion (MNTN), Augmentum Fintech [AUGM) and Seraphim Space (SSIT).
Unloved emerging markets also feature in the fund, including Vietnam-focused VinaCapital Vietnam Opportunity (VOF) which is the secondlargest holding at 4.6% of the portfolio.
Taking advantage of the benefits of Georgia’s geographical position at the crossroads of Europe and Asia, the fund is invested in Georgia Capital (GGEO).
The fund’s largest holding is in Baker Steel Resources (BSRT), which acquires promising mineral deposits and either develops the mine itself or sells it to a multinational to move the mine into production.
CONTROLLING THE DISCOUNT
The MIGO board proactively buys back shares to control the discount to NAV and in 2024 purchased £5.5 million shares. The trust operates a shareholder redemption policy every three years with the next liquidity opportunity in 2027.
In 2024, investors representing 5.3% of the trust’s capital elected to redeem and the shares were subsequently repurchased.
The trust has an ongoing charge of 0.65% a year. [MG]
Another record year for ME Group International means we’re happy to stay buyers
Company has delivered a compound annual growth rate of 30% in free cash flow over the last half decade
ME Group International (MEGP) 188.6p
Gain to date: 18%
We highlighted instant-service equipment group Me Group International (MEGP) as a compelling investment opportunity in February 2024.
The company’s business model is unique with inherent strengths allowing it to generate high returns on capital and consistent cash flow. This in turn provides potential for supplemental growth through acquisitions which are not factored into analysts’ earnings forecasts.
WHAT HAS HAPPENED SINCE WE SAID TO BUY?
The shares have comfortably outperformed the mid-cap FTSE 250 index since February 2024 with the business set to deliver another record year of profitability. In its last trading update of 2024 (4 December) the company said it expected to deliver 7% growth in revenue to ‘at least’ £318 million and a 10% increase in pre-tax profit to ‘not less than’ £73 million for the 12-months to the end of October.
growth of around 4.4% excluding currency movements and continues to throw-off cash which is used to invest in the fast-growing and higher margin laundry business.

The growth driver has been the roll-out of its Wash.ME automated laundry machines with 1,111 machines installed across key regions including the UK and France, representing 21% year-on-year growth in constant currencies.
The photobooth division is expected to show
As the company flagged at the half year results (15 July) the Japanese yen has shown considerable weakness against the pound, falling by around 12% while the euro fell by 2%, impacting reported revenue when converted back into sterling. The effect is purely translational and has no impact on the underlying operations. Analysts at Berenberg point out the full year outturn will mark the fourth consecutive year of double-digit profit growth this decade.
WHAT SHOULD INVESTORS DO NOW?
The business continues its growth momentum which we believe is not reflected in the low-teens PE (price to earnings) ratio of the shares, providing scope for a rerating. The shares have dropped back by around 16% since November 2024, giving investors another bite at the cherry. [MG]
ProCook continues to outperform the UK kitchenware market
Growing customer base and new store openings help sustain recent momentum
ProCook (PROC) 37p
Gain to date: 22%
Kitchenware outfit ProCook (PROC) has continued to outperform its wider market since we said in October 2024 the company was a compelling recovery play.
WHAT HAS HAPPENEND SINCE WE LAST SAID BUY?
The shares have gained more than 20% benefiting from sales generated by its relaunch on Amazon [AMZN:NASDAQ] and a decent showing across Christmas and Black Friday.
The company said on 8 January that thirdquarter retail revenue increased by 12.4%, the sixth quarterly advance in a row. In addition, thirdquarter e-commerce revenue increased by 9.2%, driven by increased traffic and conversion yearon-year.
The Gloucester-headquartered group is not hesitating when it comes to opening physical retail outlets either. A further five new stores opened in the third quarter and a further three are set to open in the current quarter, bringing total openings in the 2025 financial year to 12.
WHAT SHOULD INVESTORS DO NOW?
We remain upbeat about ProCook’s continued momentum and market share gains. After it managed to ride out a soft October/November impacted by Budget uncertainty.
The company is doing well, and we think investors should sit tight after a tough few years post its 2021 IPO (initial public offering). The current valuation doesn’t reflect the growth opportunities from further store expansion and other growth initiatives.

ProCook is on track to launch phase four of its new electricals range focusing on coffee in the fourth quarter.
Canaccord’s Mark Photiades says: ‘The outlook [for ProCook] is improving and the business is carrying good momentum with a new strategic plan that is gaining traction and targets 100 UK retail stores, up from 64 at the end of third quarter 2025 and aims to deliver £100 million of revenue and a 10% operating profit margin over the medium term.’ [SG]
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By James Crux Funds and Investment Trusts Editor
INVESTMENT TRUSTS AT CRUNCH POINT
WHAT A US HEDGE FUND’S
INTERVENTION MEANS FOR INVESTORS
The normally sleepy world of investment trusts received a wake-up call just before Christmas with the publication (18 December 2024) of a shareholder letter by activist investor Saba Capital Management calling for change at no fewer than seven wellknown funds.
Set up by hedge fund manager Boaz Weinstein, Saba has a history of successfully instigating change, and while critics argue its proposals are self-serving, the campaign could be the kick the sector needs to accelerate
corporate action, which Stifel says ‘still seems subdued considering the extent of discounts’.
While 2024 saw strength for markets in general as they continued to be driven by technology stocks, the investment trust sector continued to struggle and the average discount only showed a brief glimpse of improvement during the summer, but mostly languished around the 15% to 16% level. There has already been a wave of exits from the trust universe thanks to mergers and investment companies being wound up.

WHAT DOES SABA WANT?
Saba has called general meetings at each of the trusts, where it is a major investor, because in its view the current boards have ‘failed to hold the investment managers accountable for the wide trading discounts to NAV (net asset value) and their inability to deliver sufficient shareholder returns’.
‘What caught my attention for the past three years is the UK trust industry’s discounts have deepened as a consequence of investors losing faith in managers after shockingly poor performance in certain trusts,’ says founder and manager Boaz Weinstein. ‘At the same time, the boards have not held those managers accountable,’ adds the manager.
While Saba prefers to engage privately with boards, ‘underperformance, persistent trading discounts and disengaged management teams leave us no choice but to act’, says the firm.
The resolutions will be ordinary resolutions, which require 50% of votes cast to pass.
CHALLENGING PERFORMANCE
When it sent its letter on 18 December, Saba declared stakes ranging from just under 19% to over 29% in seven well-known trusts, making it the largest investor in each, namely: Baillie Gifford US Growth (USA), CQS Natural Resources Growth & Income (CYN), Edinburgh Worldwide (EWI), European Smaller Companies (ESCT), Henderson Opportunities (HOT), Herald (HRI) and Keystone Positive Change (KPC).
Clearly Saba will be voting in favour of the proposals, and given participation from retail investors is typically low, Saba will likely represent a significant proportion of the turnout. Therefore, the participation of other shareholders is key to the outcome of the respective votes.
‘The proposals from Saba would fundamentally change these investment trusts,’ says Richard Stone, chief executive of industry body the AIC (Association of Investment Companies).
‘Initially Saba is proposing to replace the current independent boards with just two new directors. Saba has stated an intention to follow this with a replacement of the investment manager and a completely new investment mandate. This would likely change the asset exposure, investment risk and return profile of the companies, moving them away from the original choice made by investors.’
Stone continues: ‘Investors need to understand the details of what is being proposed by Saba, including changes to the trusts’ boards, strategy, manager or fees. They need to consider whether the investment trust would still meet their needs, as well as any potential tax implications.’

each of the seven trusts to be scheduled at the latest by early February 2025, giving shareholders the chance to vote on two resolutions – removing the current directors, and appointing new directors of Saba’s choice.

In its latter, Saba argued the boards of these trusts ‘have not minded the trading gap’, which is why it wants to offer their shareholders ‘the opportunity to elect new directors with a concrete plan to deliver shareholder value.’
Over the three years to 13 December 2024, the total shareholder return compared with their respective benchmarks has ranged from -52.8% at Baillie Gifford US Growth to +11% at European Smaller Companies, leading Saba to claim the trusts’ managers and directors ‘have failed shareholders’.
The firm has requisitioned general meetings for
The letter indicated that if the proposals pass, the reconstituted boards will assess options for delivering value to shareholders including Saba being proposed as the new investment manager of each of the trusts, with a potential change in mandate to invest in discounted trusts, as well as shareholders being offered a liquidity event near NAV, for those not wishing to remain invested if the manager/mandate were to change.
While typically low, the turnout of retail investors who make up meaningful portions of the registers will be key to the results at the general meetings.
‘By fully reconstituting the trusts’ boards, we believe we can unlock greater value for shareholders and address the long-term structural issues that have hamstrung the Trusts’ return potential under current leadership. Each of the director candidates shares a deep commitment to
Saba holdings in selected UK investment trusts

improving shareholder returns and putting your interests above their own,’ says Weinstein.
If its directors are appointed, they would have a range of options including tender offers and share buybacks, replacing the existing managers and even changing the trusts’ investment mandate or consolidating them with other trusts to realise scale benefits and synergies.
Shares notes that since the publication of its
letter Saba has increased its stakes in six of the seven trusts, in some cases to a material extent.
SETTING OUT THEIR DEFENCES
The performance of most of the requisitioned trusts has been challenging in recent years, which had contributed to discounts widening prior



to Saba’s appearance on registers.
However, several of the requisitioned companies are now trading at, or close to NAV, albeit with Saba’s stake-building boosting ratings, and several have introduced measures to tackle discounts.
One example is Keystone Positive Change, which has proposed to roll the fund over into its open-ended equivalent, whilst the performance of SpaceX has lifted sentiment towards Edinburgh Worldwide and Baillie Gifford US Growth.
Herald’s board has recommended shareholders vote against all of Saba’s proposed resolutions. Setting out its defence, the crux of Herald’s argument is that Saba “is attempting to take control of your company for its own economic benefit and change the company’s investment strategy, potentially destroying value”.
The board highlights that Herald has a strong long-term track record, whilst it was unable to find a verifiable source for Saba’s own track record, and also notes the independent board and a positive outlook for the strategy, as well as features such as the buyback policy and a three yearly continuation vote, with the next due in April 2025.
Chaired by Andrew Joy, Herald’s board pointed out that since its inception in April 2009, Saba has ‘materially underperformed’ Herald’s NAV total return of over 865%.
The board also slammed Saba’s ‘opportunistic proposal’ to take control of the company ‘for its own economic benefit rather than due to concerns about the company’s performance or share rating’.
Saba subsequently countered Herald’s statements about performance, giving the NAV
total returns of the Saba Closed-End Funds ETF (CEFS US) compared to Herald and further questioning Herald performance.
The US activist has since announced its intension to offer Herald shareholders a 100% cash exit at 99% of NAV if its efforts to reconstitute the board are successful.
‘COMPLETELY NONESENSICAL’ TO CEDE CONTROL
In the case of Edinburgh Worldwide, Quoteddata’s Matthew Read says it would be ‘completely nonsensical’ for shareholders to cede control to one dominant shareholder who can then act entirely in its own interests, ‘particularly when that shareholder’s proposals look very short term in nature and said shareholder is also proposing to install itself as the trust’s manager – managers controlling boards being a huge corporate governance No No, in fact we generally advocate that companies should have no representatives of the manager on their boards.’
CQS Natural Resources Growth & Income has published its circular in relation to the requisition, urging shareholders to vote against, highlighting similar issues to that have been raised by other boards.
It considers Saba’s proposals “self-interested and misleading” and highlights the ‘lack of detail, governance concerns and discounts on Saba’s current funds it has taken over.’
CQS’s chair Christopher Casey says Saba’s proposals are ‘without merit, introduce new and significant risk to your investment and are not

in the best interests of all Shareholders. Their claims of the company’s underperformance are misleading, their proposals demonstrate a selfinterested short-term focus, their track record is questionable and, if the requisitioned resolutions are passed, you may no longer be invested in a highly specialised natural resources investment trust with good governance and a clear strategy.’
Quoteddata’s James Carthew says: ‘Saba’s cherry-picking of statistics to suit its narrative, vague promises and cynical attempt to force its agenda on ordinary shareholders must be rejected.’
CQS Natural Resources has demonstrated in the past that its share price can double or even triple when sentiment turns in favour of its remit, says Carthew, so why would investors want to cash in the portfolio at this point in the cycle and miss out on that potential?
‘We think that it would be completely nonsensical for shareholders of all of the trusts requisitioned by Saba – including CYN – to hand control to one dominant shareholder who can then act entirely in their own interests – we continue to urge all shareholders to get out and vote against this to protect their investment.’
At the point of writing, Saba owned 26.1% of Baillie Gifford US Growth Trust, 21.1% of Edinburgh Worldwide Investment Trust and 29.7% of Baillie Gifford Keystone Positive Change Investment Trust.
The boards of Baillie Gifford US Growth and

Keystone Positive issued circulars on 6 January strongly advising shareholders vote against all of Saba’s requisitioned resolutions, while Edinburgh Worldwide reiterated its conviction in the trust’s vision and strategy saying it will urge all shareholders to vote against the resolutions and will convene a general meeting in due course.
‘APPALLED’ BY SABA’S ACTIONS
Keystone Positive Change’s chair Karen Brade said she was ‘appalled’ by Saba Capital’s actions and conduct and warned that the US hedge fund is ‘acting opportunistically, seeking to seize control of the board without a controlling shareholding, to pursue its own agenda’.
‘We believe Saba’s plan lacks transparency, would flagrantly disregard good governance, and may introduce substantially inflated fees. The proposed resolutions are not in the best interest of all shareholders and create significant uncertainty.’
Brade told Shares in person: ‘Fees will likely go up by a lot, because Saba tends to charge a lot more, and they are talking about a strategy that is vastly different to what my shareholders have at the moment. That is a global strategy with a sustainable overlay, which is very difficult to get elsewhere.’
The chair also made the point Saba is not offering certainty of cash. ‘I’m giving cash now, it’s going to be in February, and if people roll into the sister fund it will be 56 basis points. I said to Saba, “this is appalling behaviour, I have incurred significant cost for my shareholders to put this scheme in place, which has been very well received, and you are going to block it, it is outrageous”’.
Matthew Read, senior analyst at Quoteddata adds: ‘We don’t see how it [Saba] can really accuse KPC’s board of inaction given the steps that it has taken.’
Finally, European Smaller Companies and Henderson Opportunities, both of which are managed by Janus Henderson, have published their circulars outlining why shareholders should vote against Saba’s resolutions.
At European Smaller Companies, where Saba owns 29.35% of the voting rights at the time of writing, the US activist is proposing not just to take control of the board – and therefore the company – but to take over the role of

investment manager and change strategy.
The board warns investors Saba is counting on a high proportion of shareholders not voting so their participation is key.
‘The bottom line is that you chose to invest in ESCT. It has been a top performing fund in the London listed European small cap sector. Please don’t let Saba take that choice away from you,’ it adds.
At Henderson Opportunities, where Saba owns 28.4% of the capital and wants to remove all four current independent directors, the board had already been working on a ‘scheme of reconstruction’ to correct the longer-term NAV
HOW YOU CAN HAVE YOUR SAY
Shareholder in the trusts where general meetings have been requisitioned can find the company’s circular advising them how to vote on either the Shares or the London Stock Exchange website.
Investors who own shares directly and are listed on a trust’s main register will receive the circular by post, along with a Form of Proxy which should be filled in with your voting intentions and sent back to the company regardless whether or not you aim to attend the general meeting.
For most small investors, who own their shares via a platform such as AJ Bell (AJB), the voting process is straightforward.
On the AJ Bell website, log into your account, click on the drop-down menu in the box titled ‘Account Menu’ and select ‘Voting Instructions’, which will bring up a new page listing your investment, a description of the event (in this case general meeting), the last date by which you need to send your instructions (usually a week or so before the event) and a button saying ‘Give Instruction’.
Clicking on this button takes you to the ProxyVote website, where you can view the meeting agenda, ‘learn before you vote’, or request to attend the meeting in person.
If you want to attend in person, you simply fill in your details online and submit the form and an attendance card will be sent to your registered address.
If you own more than one of the trusts in question, attending the general meetings in person may not be possible in which case you should review the resolutions which are laid out on the page.
and share price performance including offering investors a full cash exit at NAV and/or the option of rolling their shares over into Janus Henderson UK Equity Income & Growth (7494221).
The board believes Saba wants to take control of the company, sack the managers and pursue its own investment strategy ‘which would likely be fundamentally different to the existing strategy and have a much higher risk profile’.
The board also warns if appointed as investment manager, Saba may seek to charge ‘significant hedge fund fees’ and there may be no shareholder vote on the terms of its appointment as the new manager or the level of fees payable.

For each resolution, you will be asked to vote your shares For or Against, or you can decide to Abstain, although that would rather seem to defeat the object, and, as the AIC has warned, not voting could make a big difference to your investment.
Table: Shares magazine • Source: Company, Deutsche Numis, Saba holding as of 7 Jan 2025

SELECTIVE VIEW OF PERFORMANCE
Paul Angell, head of investment research at AJ Bell, said Saba has centred its case for intervention around the poor performance of the seven trusts, as well as their respective board’s inability to control discounts.
‘When it comes to the former, Saba have been somewhat selective in highlighting threeyear relative returns, with most of the trusts performing better on a longer-term basis,’ noted Angell.
‘At the upcoming meetings, investors will need to think hard about whether they want to jettison the existing management teams and their investment process in favour of an activist strategy run by Saba. Any votes in favour will need to be clear-eyed to the upcoming overhaul and departure from the existing investment rationale within the trusts.
‘Saba have also offered to provide tender offers on the trusts, should their new directors be appointed. Given the relative symmetry between share prices and NAVs, these offers will be of limited additional use for investors wanting to exit close to NAV, although they will provide a useful exit opportunity for those who don’t want to remain invested under Saba’s activist investment strategy in the instance that their ambitions are realised.’
Quoteddata’s Read observed that despite various boards and managers attempting to engage with it, ‘all of those that we have spoken to have said that Saba was not interested in talking to them’.

He also sees an obvious flaw in Saba’s strategy.
‘Saba wants shareholders to replace the current boards and deliver on its plan to “quickly deliver substantial liquidity and long-term returns for all shareholders”.
‘However, those two are often mutually incompatible, particularly for some of the funds it is targeting where the underlying holdings are less liquid – Herald being the obvious example as it is a big fund with a huge tail of small illiquid positions that trade by appointment that could take years to sell off and you would likely move the market against you in many of these, particularly once the market spots you as a forced seller.’
Read continued: ‘The call for substantial liquidity also ignores the unquoted positions held by trusts such as EWI and USA. These are longterm investments and, for some, the pay outs can be big as has recently been illustrated by the spectacular success of SpaceX. This and the other challenges we highlighted above have long made us feel that Saba doesn’t really understand some of the funds that it is invested in.
‘It is well-documented that Saba has been successful with similar attacks in the US but the UK closed end fund market is fundamentally different. Standards of corporate governance are higher, and returns have generally been better, so this sort of approach makes less sense, particularly now that progress has been made on addressing problems such as the cost-disclosure issues and so discounts are now retrenching.’


INVESTEC SLAMS SABA’S ‘EGREGIOUS AND OPPORTUNIST ATTACK’
The independent broker is ‘deeply concerned’ about the activist’s proposals on many levels
Investec says it is time shareholders in the seven targeted trusts ‘man the barricades’ against Saba’s ‘egregious and opportunistic attack’ and strongly recommends they vote against its resolutions. Nevertheless, the broker concedes this is a time for industry self-reflection, since the US activist’s actions send a clear message that more needs to be done to narrow discounts and control discount volatility.
CLASSIC ACTIVIST TACTIC
In a note published on 10 January, Investec, which isn’t a broker to any of the seven targeted trusts and is therefore deemed independent, slammed the fact Saba’s campaign was launched over Christmas. Investec explained this is a classic activist tactic designed to reduce the length of time these investment trusts can engage with shareholders and mount an effective defence. ‘We see this as “greenmail”, pure and simple’, thundered analysts Alan Brierley and Ben Newell. In their opinion, the campaign is all about Saba

looking to opportunistically take advantage of a UK investment trust industry enduring a perfect storm after an extended and exceptionally strong period, and seeking to grow its own assets under management. Investec warned it is ‘deeply concerned’ about Saba’s proposals on many levels.
‘While the devil is supposed to be in the detail, the latter is conspicuous by its absence. Just how are shareholders expected to make an informed decision with Saba failing to provide even basic information on key fundamental issues including their own track record, future portfolio exposure, fee arrangements, liquidity options and discount control mechanisms,’ said the broker. ‘The paucity of information suggests strongly to us that Saba is relying on investor inertia, rather than the strength of its own arguments, for the resolutions to succeed.’
AN INCONVENIENT TRUTH
Investec also called out an ‘inconvenient truth’ for Saba in the performance of its own funds. Since launch in 2017, the total return from Saba’s flagship Closed End Fund ETF is 124% versus a benchmark total return of 191.1%, noted Investec, with the fund having underperformed in seven out of eight years. Brierley and Newell also highlighted that Saba’s two US closed end funds are trading on discounts of 8.3% and 10.5% respectively.
‘We also highlight that the management fee of the ETF is 1.1% of NAV, while the Total Annual Expenses is an eye-watering 5.8%, which reflects the fund-of-funds approach and includes interest expenses.’ In a scathing summary, Investec said Saba’s proposals suggest ‘a distinct lack of understanding, bordering on contempt, of the AIC Corporate Governance Code which provides a framework of best practice, or of the expectations of current shareholders based on a corporate governance model that has evolved over the long-term. The potential conflicts of interest are material and crystal clear.’
DISCLAIMER: AJ Bell, referenced in this article, owns Shares magazine. The author (James Crux) and editor (Tom Sieber) own shares in AJ Bell.

How the obesity drug market is evolving in unexpected ways as we enter 2025
Daily oral tablets are expected to enter the market in 2026 along with medications which have fewer side effects while food companies look to get involved
Out of nowhere the market for weight loss drugs has become one of the most exciting investment themes in the last two years, rivalling investor enthusiasm for AI.
There is good reason for the excitement.
Rod Wong, managing partner at RTW Biotech Opportunities (RTW) fund describes the development of obesity drugs as the biggest ever financial opportunity in healthcare.
That is because obesity is the biggest disease challenging western society and linked to many of the top 10 causes of death including cardiovascular disease, stroke, cancer, and kidney disease.
Wong believes the creation of effective weight loss drugs is the first innovation in healthcare to create more than a trillion dollars in value.
To put that claim into context, the increase in market value of obesity leaders Novo Nordisk (NOVO-B:CPH) and Eli Lilly (LLY:NYSE) since 2020 is roughly £700 billion or $900 billion, most of which is attributable to the perceived value of their respective weight loss drugs.
Analysts forecast the obesity market could be generating an estimated $150 billion a year in sales by 2030.
The obesity landscape is likely to evolve rapidly in
coming years and take some unexpected twists and turns. Later we discuss how global food companies are trying to piggyback off the success of weight loss treatments, but before that we describe the current state play in the healthcare space.
ARMS RACE HEATS UP
There are currently only two approved weight loss drugs on the market in the shape of Novo’s Wegovy and Lilly’s Zepbound, which launched in December 2023.
To the end of September 2024, Wegovy generated revenue of $5.4 billion while Zepbound raked in around $3 billion for Lilly. Despite the two-and-a-half-year head enjoyed by Novo, Lilly’s obesity drug is expected to narrow the gap quickly.
Analysts are forecasting Zepbound’s annual sales to reach $27.2 billion by 2030, overtaking Wegovy’s estimated $18.7 billion in annual sales.
In an interview with Bloomberg Lilly’s CEO David Ricks said he expects Zepbound to become the biggest selling drug ever for Lilly and the one of the best-selling drugs of all time. One of the key drivers behind this forecast is the extra weight loss that Lilly’s solution induces in patients compared with Novo’s Wegovy.
A head-to-head study released in December

2024 by Lilly showed that patients shed an average 20% of their bodyweight, far superior to the average 14% bodyweight loss for Novo’s Wegovy.
This is just the beginning of the arms race to improve effectiveness and reduce associated side effects. Both firms are working hard to maintain their effective duopoly and lead against competitors.
There are around 20 quoted global pharmaceutical and biotech companies which have entered the race to develop obesity drugs. The larger ones include AstraZeneca (AZN), Amgen (AMGN:NASDAQ), Pfizer (PFE:NYSE), Roche (RO:SWX) and Regeneron Pharmaceuticals (REGN:NASDAQ)
Novo and Lilly are also fighting against time because of the loss of patent protection, which for Wegovy is expected in the 2031/32 timeframe. Both companies are working on improved versions of their GLP-1 (glucagon-like-peptide-1 agonists) treatments which work by mimicking a protein in the gut which tells the brain it is full, reducing appetite and balancing blood sugars.
On 20 December Novo shares plummeted more than 25% after the company released results from a late-stage clinical trial of its next generation treatment, CagriSema which failed to live up to expectations. Although the drug induced a 22.7% average weight loss, an improvement on Wegovy, it was barely superior to Zepbound’s 20% weight loss. Only 40% of patients lost the targeted 25% reduction in weight and many stopped early due to side effects including nausea and vomiting. Meanwhile Lilly is conducting late-stage trials with its own next generation treatment, Retatrutide with results expected by the end of 2025. Current treatments are given via weekly
injections and both companies as well as several others are working on a daily oral version which will likely open the market up to a wider population. Lilly is expected to release results from a late-stage trial of its oral GLP-1 formulation Orforglipron in the first half of 2025.
The obesity market appears to be a straight fight between the two incumbents given the extensive lead they have over competitors, but if there is one thing investors have learned within technology and science, it is to expect the unexpected.
Rod Wong told investors at an event in December 2024 that he expects the number of biotech competitors in the obesity space to triple over the next few years.
FOOD COMPANIES PIGGY-BACK WEIGHT LOSS BOOM
There was concern among investors that food companies would be negatively impacted by people eating less while on weight loss drugs. In 2024 retail giant Walmart (WMT:NYSE) said it saw evidence of a slight pullback in food consumption when people took the medication, which led to a sell-off in the share prices of food companies.
One of the world’s largest food groups, Swissbased Nestle (NESN:SWX) has seen its shares underperform the FTSE World index by more than 80% since late 2022, when interest in obesity drugs started to take-off.
Perhaps unsurprisingly, Nestle has responded to the booming demand for weight loss drugs and is looking to participate in what management see as a new market opportunity. Nestle’s Health Science division has launched a platform called glp1nutrition.com to respond to consumer needs for solutions while on weight-loss programmes.
GENERIC MAKERS MAKE HAY
So far, the US insurance industry has tried to regulate the pace of reimbursement for obesity drugs to reduce the financial burden.
This means none of the elderly over 65 years of age on the US government health plan Medicaid are eligible for subsidised obesity drugs and only around half of people on Medicare, the general health plan, get cheaper access to the drugs.
This makes a big difference because the list price for Wegovy in the US is around $1,350 per month while Zepbound is only a slightly more digestible $1,100 per month.
On average for those people with sone kind of insurance coverage the net cost is around $375 per month. As obesity drugs continue to demonstrate
additional health benefits such as reducing the risks of stroke, sleep apnoea, kidney disease and cognitive decline, the more likely the insurance industry will increase access to them.
In any case, despite these restrictions and Novo and Lilly spending billions of dollars to build new manufacturing capacity, both companies have struggled to keep up with surging demand. This has led to shortages and in order mitigate the impact, the US FDA (Food and Drug Administration) has allowed certain licenced pharmacies to step in to ensure a consistent supply. These products are commonly referred to as compounders.
Although the pharmacies do not undergo the same FDA approval process as commercially available drugs,
The KitKat chocolate bars and Nesquik shakes maker has launched protein shots in the US which it claims suppress appetite by inducing a natural reaction in the body like current GLP-1 treatments, but with less potency.
The shake, called Boost Pre-Meal Hunger Support is designed to be consumed half an hour before a meal. The shots are sold at $10.99 for a pack of four on Amazon (AMZN:NASDAQ) and advertised as promoting a ‘natural GLP-1 response to a meal’.
Stephan Palzer, chief technology officer at Nestle told Reuters: ‘You get an increase in natural GLP-1 which helps in controlling the feeling of hunger. So, this dose has a significant effect on satiety’.
The formula used by Nestle has been patented but is not intended to replace weight loss drugs. Nestle conducted a study in 2021 on patients with type-2 diabetes which showed participants taking their whey protein shake saw a 22%
the compounds are procured from FDA registered and GMP (Good Manufacturing Processes) approved facilities.
Telehealth companies such as Hims & Hers Health (HIMS:NYSE) have benefited from advertising compounders at a fraction of the price of the branded drugs, generating as much a $1 billion for compounding pharmacies, according to Bloomberg. Hims & Hers shares have risen by 188% over the last year.
In December 2024 the FDA declared Lilly’s Zepbound was no longer in shortage which means the compounders have up to 90 days to stop making copycat drugs. In response to accusations of ‘flip-flopping’ by the FDA, the compounders have started litigation proceedings against the regulator.
reduction in glucose levels during the two hours after a meal, compared with participants on a placebo.
The approach of Nestle and other food groups is to focus on some of the shortcomings of current treatments, such as lean muscle loss to provide palatable solutions. Anna Mohl, CEO of Nestlé Health Science says ‘We have brands and expertise across our portfolio to support needs that can include preserving lean muscle mass, managing digestive upset, supporting an adequate daily consumption of micronutrients, and more.
‘Along with women’s health and healthy aging, GLP-1 companion products are a key solution that we’re focusing on,’ added Mohl.

Martin Gamble Education Editor
Discover the new quality ETFs which tap cash generative companies
Exchange-traded funds are typically used to track indices like the FTSE 100 but there is a burgeoning list of products which look to tap different themes and even investment styles.
This universe was recently added to with the launch of some new ETFs which look to track quality stocks.
WHAT ARE THE NEW PRODUCTS?
State Street Global Advisors is the name behind these two fresh additions – SPDR S&P Developed Quality Aristocrats ETF (QDEV) and SPDR S&P 500 Quality Aristocrats UCITS ETF (QUS5).
Investors may be familiar with the dividend aristocrat indices and the ETF SPDR S&P UK Dividend Aristocrats (UKDV). These recently launched quality ETFs track two separate indices which comprise of high-quality companies with a

proven history of generating FCF (free cash flow). The SPDR S&P Developed Quality Aristocrats ETF tracks the S&P Developed Quality FCF Aristocrats Index, which selects its constituents from a global

universe of large and mid-cap stocks whereas the SPDR S&P 500 Quality Aristocrats ETF tracks the S&P 500 Quality FCF Aristocrats Index, which selects constituents from the US large-cap S&P 500 universe. They exclude companies from real estate, banks, insurance, specialised finance sectors.
Both underlying indices are rebalanced semiannually in April and October and screen for companies that have generated FCF for 10 years in a row. From these screened universes, each index selects the top 100 companies with the highest FCF margin and FCF return on invested capital.
By prioritising FCF the ETFs aim to deliver exposure to companies with a disciplined approach to their finances. Remember, clever accounting can paint profit and earnings metrics in a flattering light but cash flow is much more difficult to manipulate.
There is some overlap with the companies in the S&P Quality FCF Aristocrats and the S&P Developed Quality FCF Aristocrats indices with a mix of US tech giants including Apple (AAPL:NASDAQ) and Broadcom (AVGO:NASDAQ), Nvidia (NVDA:NASDAQ), Microsoft (MSFT:NASDAQ), Meta Platforms (META:NASDAQ) and global financial giants Visa (V:NYSE) and Mastercard (MA:NYSE) and healthcare groups Roche (ROG:SWX)) and Novo Nordisk (NVO:NYSE).
HOW HAVE THE QUALITY ARISTOCRATS ETFS PERFORMED?
Because the indices underlying these products is new there isn’t an extensive track record of performance to analyse. However, index provider S&P has calculated performance prior to their launch on 23 September through hypothetical back-testing based on the index methodology in place on the launch date.
The results are fairly compelling. Over the past 10 years, the S&P 500 Quality FCF Aristocrats index has returned 13.9% on an annualised total return basis, beating the S&P 500 which has returned 11.1% on the same basis.
The global S&P 500 Developed Quality FCF Aristocrats index has outperformed its base index by an even more impressive degree delivering a 12.7% total return on an annualised basis versus 8.1% for the S&P Developed LargeMidCap.
There are a couple of things to bear in mind. Trackers which seek to simply match the S&P 500 index or another global benchmark are cheaper. For example, the Amundi S&P 500 II ETF (SP5L) is one of the cheapest S&P 500 trackers with ongoing charges of 0.05% per year.
In contrast ongoing charges for the SPDR S&P 500 Quality Aristocrats ETF are 0.25% and the SPDR Developed Quality Aristocrats ETF are 0.35%, respectively.
As previously discussed the quality aristocrats ETFs constituents are predominantly large and midcap US stocks from the technology sector including the Magnificent Seven so there are risks

Top performing quality ETFs over a
one- and three-year period
One-year Three-year
Table: Shares magazine • Source: JustETF 10 January 2025
performance is closely tied to a relatively small number of super-sized businesses. Also, as discussed the past performance currently available is hypothetical as the indices were only launched last September, so investors will need to wait a bit longer to get an ‘actual’ performance history of any meaningful length.
THE BROADER QUALITY ETF UNIVERSE

There are other quality ETFs and indices which have been around for longer but they

face the same issue which is the question of how to define what a quality company is. Determining what represents a quality stock is subjective and there is no universal definition. Some might argue you need the expertise of a professional fund manager to spot genuine quality.
However, it does help if a company exhibits strong fundamentals in terms of profitability and pricing power, earnings quality, a proven track record (preferably over 10 years or more) and potentially a strong brand that enhances their competitive position. Some of these can certainly be captured through an index-backed product.
An ETF which could be placed in the quality category and focuses heavily on brands is L&G Global Brands ETF (LABL). This has returned 36.8% over the past year and includes Amazon (AMZN:NASDAQ) and Tesla (TSLA:NASDAQ) in its top 10 holdings.
There are also impressive returns from iShares Edge MSCI USA Quality Factor ETF (IUQA) which has returned 27.2% to investors over the past year. This ETF includes Apple, Nvidia, US pharmaceutical giant Eli Lilly (LLY:NYSE) in its top 10.

By Sabuhi Gard Investment Writer

WATCH RECENT PRESENTATIONS




Investment Evolution Credit (IEC)
Marc Howells,
CEO
Investment Evolution Credit is a United Kingdom group of fintech companies whose main business activities are online consumer loans. The IEC group has been operating in the consumer finance industry in the United States since 2010 via licensed subsidiary MRAL US Corporation which provides online personal loans.
Strix Group (KETL)
Mark Bartlett, CEO
Strix Group manufactures and markets kettle controls for appliances. The company is engaged in the business of design, manufacture, and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management, and water filtration. Its revenue is generated by the sale of thermostatic controls, cordless interfaces, and other products such as water jugs and filters.
Ashoka India Equity Investment Trust (AIE)
Prashant Khemka, Portfolio Manager
Ashoka India Equity Investment Trust is a diversified, long-only equity investment trust. The investment objective is to achieve long-term capital appreciation, mainly through investment in securities listed in India and listed securities of companies with a significant presence in India.
Why are so many active fund managers underperforming?
Machines haven’t been winning in every category but they dominate in the US and Global sectors
Every six months at AJ Bell, we publish a report on the proportion of active managers beating the typical passive fund in seven key equity sectors. It’s called Manager versus Machine, and ever since we launched the report in 2021, it has made challenging reading for active managers. In the latest edition, our analysis showed that overall, just 33% of active equity funds outperformed the typical index tracker in their sector (see table). That doesn’t sound like a good result, and it isn’t. But it’s probably better than you think. All active managers aim to outperform, and all investors in active funds want them to, but it’s simply not possible. Broadly speaking, the buying and selling activity of all investors, including active fund managers, dictates what the market return is. Consequently, some will be on the wrong side of the market return, some on the right side. A reasonable result would be for somewhere around half of active managers to outperform a passive alternative. That would mean the blind choice between active and passive funds is a coin flip, and with some judicious fund manager selection, investors could actually tilt the odds in their favour so that more active funds in their portfolio outperform than underperform.
ACTIVE MANAGERS HOLDING OWN IN SOME AREAS
As the figures from our Manager versus Machine report show, that is some way from being the case overall. However, there are some areas where active managers have held their own against the passive machines over 10 years, notably funds investing in Europe, Emerging Markets, and Japan. The real areas where active managers have been routed by index trackers is in the US and Global sectors, where just 23% and 17% of active managers have outperformed a tracker in the last decade. There are a lot of funds in these two sectors, and so results here really have a big impact

on the overall figures. Looking at active equity funds without these two sectors, the number outperforming a passive alternative rises to 44%. More respectable, if not tub-thumping. Without getting too precise, there are seven reasons which largely explain why active funds in the US and Global sectors have done so poorly compared to index trackers. They are the group of stocks known as the Magnificent Seven.
These US technology stocks have dominated stock market performance for a long time now. Nvidia (NVDA:NASDAQ) alone accounted for 20% of the rise in the S&P 500 (the main US stock index followed by trackers) in 2024, according to numbers calculated by Fundsmith.
If you didn’t hold Nvidia, or perhaps only held a little, outperforming becomes very difficult. This applies to active managers in the Global as well as US sector, because the US stock market now makes up around 75% of the world stock market, again mainly because of the strong performance of the Magnificent Seven.
REASONS FOR UNDERPERFORMANCE
There’s nothing stopping active managers holding these companies. Many do. But these tech titans have become so dominant that the amount invested by index trackers is unlikely to be matched by active investors. At the beginning of 2024, the typical S&P 500 tracker held 28% of its portfolio in the Magnificent Seven tech stocks, with 7% in each of Apple (AAPL:NASDAQ) and Microsoft (MSFT:NASDAQ)
Some, but by no means all, active managers might be willing to hold such large positions in the companies they have the highest conviction in. It would be some coincidence if their research led them to invest in every one of the Magnificent Seven though.
Percentage of active funds outperforming the average passive alternative
Source: AJ Bell, Morningstar
Any active fund which did hold the same amount in the Magnificent Seven as a tracker fund would also be guaranteeing underperformance on that portion of their portfolio. That’s because performance would be the same as a tracker fund before fees, and so less after fees, as active managers charge more than (most) tracker funds.
The rest of the portfolio would therefore have to do a lot of heavy lifting to generate outperformance for the fund as a whole. Indeed because of the strong performance of the Magnificent Seven, US index funds have become even more concentrated, with the typical US index tracker holding 33% of their portfolio in these seven companies as at the end of November.
So, does this mean fund investors should simply steer clear of active funds? Based on the amount of money that is flowing out of active funds and into trackers at the moment, undoubtedly some people are. But the high concentration of Magnificent Seven stocks in US and Global trackers does provide some cause for concern about concentration risk when it comes to funds tracking these markets, especially when these companies are trading at high valuations.
Bear in mind that index trackers aren’t investing lots of money in these companies because they’re great businesses, but simply because they’re very big businesses. If the Magnificent Seven continue to perform well, we can expect trackers to keep
beating active funds around the park. But if there is a correction in the technology sector, passive funds will probably be hurt the hardest.
NOT JUST ABOUT PERFORMANCE
Whether you invest in active or passive funds doesn’t just come down to performance. If you don’t feel confident picking active funds, then tracker funds are the way to go. But if you are willing, keen even, to roll up your sleeves and pick out active managers who you think can deliver outperformance, then there’s a good case you should so with at least some of your portfolio. Remember you don’t have to hold all of your money in either active or passive, you can have a bit of both.
Blending them together mitigates the impact of any underperformance from active managers, and also helps to hedge the concentrated stock and sector risk currently at play in Global and US tracker funds.
DISCLAIMER: AJ Bell owns Shares magazine. The author (Laith Khalaf) and editor (Tom Sieber) of this article own shares in AJ Bell.

By Laith Khalaf AJ Bell Head of Investment Analysis

There are fewer AIM heavyweights as it hits 30 year anniversary
Number of junior market companies worth more than £1 billion at nine-year low as more stocks move to Main Market or get taken over
The number of companies on London’s AIM market worth more than £1 billion has hit a nine-year low. A mere six stocks were worth more than £1 billion at the end of November 2024 compared with 30 at the end of 2021.
From those 30 companies and excluding those still worth more than £1 billion, seven have disappeared through takeovers, three have moved to the Main Market, and the rest have fallen below the £1 billion level due to bad news or other negative factors. The last time AIM ended a calendar year with less than six stocks worth in excess of £1 billion was 2015. There were only four qualifying names at that point: ASOS (ASC), Abcam, New Europe Property Investments and Hutchison China (now HUTCHMED (HCM:AIM)
This perilous situation coincides with more bad news for AIM. The total number of companies on AIM at the end of 2024 hit the lowest level since

the end of 2001 at 688 stocks, a far cry from the near 1,700 seen at its peak in 2007. As of 30 November 2024, the year had seen the second lowest ever number of IPOs since AIM launched 30 years ago in 1995.


• Only six companies on AIM worth more than £1 billion at the end of 2024.
• Over the past 20 years, AJ Bell calculates that 128 companies have moved from AIM to the Main Market.
• The total number of companies on AIM at the end of 2024 hit the lowest level since the end of 2001 at 688 stocks.
AIM needs a reboot if it is to stay relevant for another 30 years. The London Stock Exchange, FCA and government need to consider more incentives for companies to list on AIM and ways to attract a broader pool of investors to want to own the shares.
There is a sense of urgency to rejuvenate AIM. After all, if takeovers continue to dominate the UK market and more companies move up to the Main Market, AIM will struggle to attract new listings. Companies considering an IPO want to go where there is a big pool of prospective investors keen to support growing businesses and a rapidly shrinking market is an instant turn-off.
In its defence, AIM has served companies well
over the years, with plenty of success stories. Yes, there are tales of woe and scandals dotted around, but it has fulfilled its purpose as a growth market. AIM has acted as a stepping stone for growing companies to expand and mature, and it’s only natural that the most successful ones graduate to the Main Market.
AIM SUCCESS STORIES
Over the past 20 years, AJ Bell calculates that 128 companies have moved from AIM to the Main Market including Entain (ENT) (previously called GVC when it was an AIM stock), Melrose (MRO) and Unite (UTG) which are now FTSE 100 stocks; and Breedon (BREE), Domino’s Pizza (DOM) and Genus (GNS) which now sit in the FTSE 250 index.
Companies move from AIM to the Main Market for two key reasons:
• Inclusion in FTSE indices. Qualifying for the FTSE 250 or FTSE 100 would trigger tracker funds to buy the shares and being in either index can lead to greater liquidity for the stock.
• Boost reputation. Being listed on the Main Market can increase a company’s profile among the public and its peer group, which can lead to greater media coverage and potentially more analyst research coverage of the stock. A lot of investors dismiss AIM stocks, believing it to be a market full of tiny companies, whereas Main Market stocks are often considered to be more established businesses.
Numerous stocks transferring from AIM to the Main Market have subsequently been taken over as moving to the more prominent exchange can often signify a company that’s going places.
Transfers from AIM to Main Market over the past 25 years

Larger companies often look at the mid-cap space for acquisitions to augment their own growth, either buying smaller rivals or a company that takes them into a new area.
For example, Tesco (TSCO) secured a strong foothold in the wholesale market through its £3.7 billion acquisition of Booker in 2018. Booker had previously moved up from AIM to the main market in 2009, at which time it was valued at approximately seven times less than what Tesco paid at £491 million.
Other AIM-to-Main Market alumni include Peppa Pig rights owner Entertainment One which was gobbled up by Hasbro (HAS:NASDAQ) for £3.3 billion in 2019; and gold miner Centamin was recently bought by AngloGold Ashanti (AU:NYSE) for £1.9 billion.
The pace of companies leaving AIM for the Main Market has been fairly steady for the past decade or so, at between two and six stocks annually. Two stocks moved up in 2024: copper producer Atalaya Mining (ATYM) and financial services provider Alpha Group (ALPH).
WHICH STOCKS COULD BE NEXT TO MOVE TO THE MAIN MARKET?
Gamma Communications (GAMA:AIM) plans to move to the Main Market from AIM in mid-2025,
it shifted to the top stock exchange.
Jet2 is a perfect example of a business which has been transformed during its time on AIM. Starting life as a company transporting flowers, over the years it morphed into a broader cargo business by air and road, but the real turning point was the 2003 launch of a scheduled passenger airline. Its leisure activities have been a runaway success.
Jet2 has earned a reputation for good customer service and reliability and is now a serious competitor for the big low-cost airlines EasyJet and Ryanair. It’s also made investors a mint as it is the best performing stock on AIM since the market was launched in 1995, with a 6,760% share price return.
Over the past 10 years, the average size of a company moving from AIM to the Main Market is £586 million. There are currently 20 stocks on AIM larger than that size, including Learning Technologies (LTG:AIM) which is in the middle of a takeover situation.
Possible sub-£1 billion AIM contenders for transferring to the Main Market include engineering services provider Renew Holdings (RNW:AIM) and construction group SigmaRoc (SRC:AIM), both of whom have repeatedly made acquisitions to drive growth. Valued at £720 million and £830 million respectively, they are both sufficiently mature enough to attract broader institutional investor interest, and both would comfortably slot into the FTSE 250 index given their

One of the key reasons why companies have historically chosen AIM over the Main Market is the ability to make acquisitions without a shareholder vote, with the exception of reverse takeovers. It meant they could find opportunities and act on them quickly. Changes to the listing rules in 2024 have put the Main Market on a more level playing field with AIM in this regard. That suggests AIM will now have greater competition in terms of where companies choose to list.
Will Jet2 be the latest company to move to the Main Market?

Ask Rachel: Your retirement questions answered
How will I be taxed if I use my SIPP pot to buy an annuity?
Dealing with a question around the treatment of money in a pension
I am 67 and after combining two SIPPS I now have a single SIPP worth approximately £500,000.
I drew income flexibly in the past from one of the SIPPs. My understanding is that I can take 25% tax free from my SIPP at any point and then the remaining pot is taxed on withdrawal at marginal rates.
I could use some or all of the remaining amount in the SIPP to purchase an annuity, so my question is on the taxation of annuities purchased, and whether this is different depending on whether the funds used to purchase the annuity have had 25% tax free allowance already taken?
Simon

Rachel Vahey, AJ Bell Head of Public Policy, says:
One of the benefits of pensions is the flexibility to take as much money as you want and when you want from the plan.


If you are 55 or over (rising to 57 from April 2028) you can access the money in your SIPP. You don’t have to take it all at once; if you want you can access a bit at a time. You then have a range of options about how you can take the pension pot.
You can take your tax-free cash, which is usually 25% of the pension pot, and use the remainder to buy an annuity, which is a guaranteed income for life. Or you could move the remainder to drawdown and then take an income either regularly or on an ad-hoc basis. Alternatively, you could take the whole 75% as a taxed lump sum.
When you do take the income from the money accessed (the remaining 75%) – whether that’s an income from drawdown, an annuity instalment or as a lump sum – it is taxed as income at your marginal rate. It’s easy to see how taking a larger amount of income can push up your total income and may

mean part or all of it is taxed at a higher rate of tax. Buying an annuity means exchanging a lump sum with an insurance company for the guarantee that an income will be paid to you until you die. Most annuities are bought on the basis that they are only ever paid to the person buying them and stay the same level each instalment. However, you can choose for them to increase each year – in line with inflation or at a fixed rate. Or you can opt for them to continue to your partner when you die, probably at a lower rate, say 50%.
Picking either or both of those options will reduce the starting amount of income you could receive. So, you will need to work out if it’s worth it for you.
OPTING NOT TO TAKE TAX-FREE CASH
You could increase the amount of income you could receive by choosing not to take any tax-free cash, as the lump sum being used to buy the annuity will be that much larger. But each income payment would still be taxed at your marginal rate, and you would lose the right to receive any tax-free cash from those funds.
Ask Rachel: Your retirement questions answered

The starting income offered to you by an insurance company will also depend upon your health conditions, and most annuity providers will ask for some medical information upfront so they can work out the best rate to offer you.
After annuity rates being in the doldrums for the 2010s, they have recently increased, in part because gilt yields are rising. And the recent gilt yield resurgence should filter through to improved annuity returns. This may mean they become a more attractive option for some.

When deciding whether to go down the drawdown or annuity route it’s important to remember that they have very different strengths and weaknesses.
Broadly, annuities are guaranteed, so regardless of what happens in the economy or what changes government make, they will keep on paying out to you. They are also a hands-off choice; you have no further decisions or role in managing them. You can choose to bolt on some return of cash for when you die, but mostly annuities stop when you die (or
when your partner dies).
THE MORE FLEXIBLE OPTION
Drawdown is more flexible allowing you to change the amount you take each time, so if your circumstances change you can adjust. Your fund remains invested, so you have the opportunity to benefit from long-term growth. And the death benefits are extremely attractive. Currently, if you die before age 75, usually any remaining fund can be returned to your family tax free. If you die aged 75 or over, they will have to pay income tax when they take out the money.
From April 2027, the government plans to bring pensions, including unused drawdown pots, into the scope of inheritance tax (IHT). However, this is not yet confirmed, and we do not yet know exactly how this will work in practice.
Finally, this doesn’t have to be a binary choice. You can choose to use part of your pension to buy an annuity, part of it to take drawdown, and part to take wholly as a taxed lump sum. The choice is yours.

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WHO WE ARE
EDITOR: Tom Sieber @SharesMagTom
DEPUTY EDITOR: Ian Conway @SharesMagIan
NEWS EDITOR: Steven Frazer @SharesMagSteve
FUNDS AND INVESTMENT
TRUSTS EDITOR: James Crux @SharesMagJames
EDUCATION EDITOR: Martin Gamble @Chilligg
INVESTMENT WRITER: Sabuhi Gard @sharesmagsabuhi
CONTRIBUTORS:
Dan Coatsworth
Danni Hewson
Laith Khalaf
Laura Suter
Rachel Vahey
Russ Mould

Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852.
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