The investment trust initial public offering (IPO) market is picking up pace, after a slowdown last year caused by Brexit vote uncertainty. Six new trusts have been launched since the start of this year raising a total of £968m, according to Winterflood Securities, in contrast to only four trusts during the whole of 2016.
"Last year was exceptional with the uncertainty in the run-up to the European Union referendum and the fallout after the Brexit vote," said Kieran Drake, analyst at broker Winterflood. "But now we're moving back into more normal territory. And equity markets have become more positive following the election of President Trump."
The investment trusts that launched an IPO this year are:
■ TOC Property Backed Lending Trust (PBLT)
■ Impact Healthcare REIT (IHR)
■ LXI REIT (LXI)
■ BioPharma Credit (BPCR)
■ EJF Investments (EJFI)
■ Downing Strategic Micro-Cap Investment Trust (DSM)
All of the new trusts, apart from Downing Strategic Micro-Cap, have an income focus, underscoring the continuing investor demand for yield.
Income also remains a core theme for IPOs aiming to launch soon, including Jupiter Emerging & Frontier Income Trust, which will target a 4 per cent yield by investing in companies in developing economies. And PRS REIT will target a yield of 6 per cent from investing in new-build and the private rented sector.
Other trusts expected to launch IPOs this year include Impact, which will focus on impact investments in emerging markets. ScotGems is expected to invest in global smaller companies and be managed by Stewart Investors. And The People's Trust, launched by former Investment Association head Daniel Godfrey, has crowdfunded its initial capital and is also expected to come to market.
The value of secondary issuance from existing investment trusts between January and April 2017 was £1.7bn, compared with £888m during the same period in 2016.
Investment trust IPOs and secondary issuance in aggregate between January and April 2017 was £2.7bn - a 207 per cent increase on the same period in 2016, during which there were no investment trust IPOs.
Mr Drake said: "While the IPO market for investment companies appears reasonably healthy, existing funds that have delivered on their target returns and maintained their premium ratings are finding it increasingly easier to raise additional capital. This can be best demonstrated in the infrastructure sub-sector, where placings are routinely oversubscribed, such as International Public Partnerships' (INPP) £330m 'four times' oversubscribed placing."
Expected investment trust issues
Sector/fund | Target for equity (£m) | Type | Date | Comment |
---|---|---|---|---|
Debt | ||||
Hadrian's Wall Secured Investments | 80 | C Share | May 2017 | Announced plans to raise additional equity |
Starwood Euro Real Estate Debt | TBC | TBC | 2017 | Considering fund raise "later this year" |
ICG-Longbow Snr Sec UK Prop Debt | 40 | TBC | Q2 2017 | Prospectus published last month |
Equity | ||||
Jupiter Emg & Frontier Income Trust | 200 | IPO | 11 May 2017 | 4% yield target from equities |
Infrastructure | ||||
International Public Partnerships | 250 | Placing | Q2 2017 | Prospectus expected in near future |
Leasing | ||||
Amedeo Air Four Plus | 185 | Placing | H2 2017 | To fund acquisition of four aircraft |
North America | ||||
Gabelli Value Plus+ | TBC | C Share | TBC | C share with pre-emptive element |
Property – Direct | ||||
The PRS REIT | 250 | IPO | May 2017 | Investing in new build private rented sector |
Tritax Big Box REIT | 200 | Placing | May 2017 | Placing, open offer and offer for subscription |
Split Capital | ||||
Premier Energy & Water | 37 | Placing | Q2 2017 | Issue of up to 20m shares |
Source: Winterflood Securities, as at 9 May 2017