Herald Investment Trust (LSE:HRI) has emerged from this year's battle over its future as a much smaller vehicle managed by Aberdeen, after shareholders tendered 60.1% of the company's shares in July.

Herald Investment Trust (LSE:HRI) is a very different company from the one that started 2026. Its half-year report, published on 22 July, recorded the outcome of a tender offer that closed on 2 July and settled a week later: 28,755,072 shares, or 60.1% of those in issue, were tendered for a total of £957.4m.

The transaction left the trust (LSE:HRI) with 19,103,395 shares in issue, and the chairman put net Assets after the tender at about £650m, compared with £1,655.6m at 30 June. Holders could choose between an in-specie option, fully subscribed at 3,358.34p a share for £551.7m, and a cash option, undersubscribed at 3,290.73p a share for £405.7m.

Those events followed a contest that began in earnest in January, when the board proposed a 100% tender at close to net asset value with the stated aim of allowing short-term shareholders, including the activist Saba Capital, to exit. At that point Saba owned about 30% of the trust, and the shares stood at a discount of 12.3%.

About the company

Herald Investment Trust is an investment trust that focuses on smaller listed technology, media and telecommunications companies, with a particular interest in firms that are not widely followed by the market. The portfolio is broad, with 248 holdings at the half-year point, and individual positions are small relative to total assets. This wide spread is intended to reduce reliance on any single business, while giving shareholders exposure to innovation across software, semiconductors, communications and related industries.

The trust makes returns through share price gains and dividends from its holdings, and it can also hold cash and Government Bonds when the managers want to reduce exposure. At the end of June, those liquid holdings represented 44.7% of the portfolio, reflecting preparation for the tender offer. Its performance is reported as net asset value per share and compared with indices of smaller companies and technology stocks.

The financial details in the article show a company reshaped within months. Net asset value per share rose 28.1% to 3,459.4p in the first half, and net assets of £1,655.6m at 30 June fell to about £650m after the tender, in which 60.1% of shares were taken up. Aberdeen has been the manager since 1 August.

Aberdeen takes over

Management has changed as well. Aberdeen replaced Herald Investment Management as alternative investment Fund Manager and investment manager on 1 August, with Katie Potts and several members of her team moving across. The company secretarial role passed to Aberdeen too.

The board has been refreshed in parallel. Henrietta Marsh did not seek re-election and Christopher Metcalfe became senior independent director, while Joanne Parfrey joined on 1 July and took over as audit committee chair from Stephanie Eastment on 1 October.

Shares traded at 2,565p on 6 November, around 16% below the 3,070p at which they stood on 30 June. The two figures are not directly comparable as a measure of underlying performance, since the trust's portfolio and Balance Sheet changed substantially when the tender settled and technology valuations have moved since midsummer.

Why tender offers matter for trusts

A tender offer lets shareholders sell some or all of their holding at a price linked to net asset value, instead of at a discounted market price. For a closed-ended trust, it can shrink the share count and give those who want to leave an exit, while remaining holders keep their stake in a smaller pool of assets.

A smaller trust can face higher costs per share and lower trading liquidity, so the board and manager must show how the vehicle remains suitable for those who stayed. The in-specie option in this case also meant that part of the portfolio was handed over as assets instead of cash, which affects the composition of what remains.

What to watch next

Attention will turn to the first reporting periods under the new manager, including how the portfolio is positioned and whether the discount stabilises at the reduced size. The large allocation to Liquid assets at the end of June is also relevant, since the pace and direction of reinvestment will shape returns.

The wider backdrop includes Volatility in technology valuations and the debate over artificial intelligence spending. The manager's comment that the sector outside AI infrastructure has been derated points to a market in which stock selection among smaller companies could matter more than the direction of the broader technology index.

A solid first half for small-cap technology

Performance in the six months to 30 June was notable. Net asset value per share rose 28.1% to 3,459.4p, far ahead of the 1.5% gain from the Deutsche Numis Smaller Companies plus AIM index excluding investment companies, although behind the 51.7% sterling return from the Russell 2000 Technology Index. The share price rose 27.7% over the same period, implying a discount of about 11.3% at the end of June.

The balance sheet at that date was already prepared for the tender, with net liquid assets and government bonds representing 44.7% of the portfolio, compared with 10.9% at the end of 2025. Among its stock holdings, Silicon Motion Technology was the largest at 1.8%, followed by Vicor at 1.3%, BE Semiconductor Industries at 1.2%, Celestica at 1.1% and Diploma at 1.0%. The top 20 positions amounted to 17.3% of total assets, underlining the trust's broad spread across 248 holdings.

The chairman wrote that the longer-term outlook remains highly positive, while warning of near-term volatility from geopolitics and technology valuation cycles. The manager's report characterised valuations in artificial intelligence infrastructure as reflecting a Bubble in revenues and profits rather than in Earnings multiples, and said the rest of the sector had been derated.

For the FTSE 250 constituent, the question now is how a smaller trust performs under Aberdeen's stewardship with Ms Potts and several of her colleagues still at the helm.