Hadrian's Wall Secured Investments (HWSL) is the first investment trust to list on the main market this year, bringing an end to the longest drought of investment company initial public offerings (IPOs) since 2009.
The trust has raised £80m, short of its original target of £150m. It will invest in UK small- to medium-sized enterprise (SME) commercial loans secured on a range of assets, including equipment, plant and machinery, real estate and receivables.
No other investment trusts have launched this year. Analysts at Numis report caution among investors amid market volatility and fears of a possible exit from the European Union, with investors wary of making asset calls ahead of this. In recent years the investment trust IPO market has been strong - nearly £11bn was raised between 2013 and 2015, according to Numis. But 2016 has been the first year in seven in which there have been no IPOs over the first quarter.
Healthcare Royalty Trust was planning to raise £200m-£300m earlier this year to invest in healthcare royalty assets, but pulled the launch in April citing "unfavourable market conditions".
Investing in trusts at IPO can be beneficial if it gets you into a trust that soon moves to a premium to net asset value (NAV). However, some trusts fall to a level below their issue price and you are likely to have to wait longer to receive dividends than if you bought a trust on the secondary market.
Hadrian's Wall hopes to be fully invested within six months when it intends to start paying a dividend of at least 6 per cent on the 100p issue price, which is expected to grow over time. The company's share price initially increased on listing to over 102.50p, but has since fallen back to near its listing valuation.
The company is ranked in the Association of Investment Companies (AIC) debt sector and is trading at a premium of 3.6 per cent, compared with the sector average, a discount of 4.6 per cent. Chairman David Warr said Hadrian's Wall's investments in SME lending in the UK are "complementary to other listed investment companies focusing on either the large business loan, or unsecured consumer and small business segments of the market".
