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Investment trust IPOs pick up, with more to come

Six new investment trusts have launched so far this year outstripping the total for 2016
May 11, 2017

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)TypeDateComment
Debt    
Hadrian's Wall Secured Investments80C ShareMay 2017Announced plans to raise additional equity 
Starwood Euro Real Estate DebtTBCTBC2017Considering fund raise "later this year" 
ICG-Longbow Snr Sec UK Prop Debt40TBCQ2 2017Prospectus published last month
Equity    
Jupiter Emg & Frontier Income Trust200IPO11 May 20174% yield target from equities
Infrastructure    
International Public Partnerships250PlacingQ2 2017Prospectus expected in near future  
Leasing    
Amedeo Air Four Plus185PlacingH2 2017To fund acquisition of four aircraft
North America    
Gabelli Value Plus+TBCC ShareTBCC share with pre-emptive element
Property – Direct    
The PRS REIT250IPOMay 2017Investing in new build private rented sector 
Tritax Big Box REIT200PlacingMay 2017Placing, open offer and offer for subscription
Split Capital    
Premier Energy & Water37PlacingQ2 2017Issue of up to 20m shares

 

Source: Winterflood Securities, as at 9 May 2017