Trusts set to smash annual fundraising record in 2021

A flurry of share issues pushes year-to-date total raised by investment trusts past £8.7bn, with broker Winterflood predicting the 2021 total will easily beat the record £9.8bn reached in 2017.

The investment trust sector is on track for a record-breaking year for fundraising, says Winterflood Securities, with infrastructure funds proving the key driver as governments pin their plans to ‘build back better’ on a green recovery.

While August was a relatively quiet month for share issuance, Winterflood said 2021 was shaping up to be one of the strongest years on record for trusts raising new money. 

‘We believe that this was the quiet before the storm, with a wave of issuance likely in the remaining months of the year,’ said Simon Elliott, head of investment companies research at the broker.

A total of £8.7bn was raised by London-listed closed-end funds in the first eight months of 2021, taking total assets under management to £265bn, according to the Association of Investment Companies. Although August experienced a typical summer lull, proving by far the weakest month of the year for issuance so far with £241m raised. That came after a whopping £1.6bn raised in July.

The year-to-date total is already ahead of the £7.8bn raised in the whole of 2020, when the Covid-19 pandemic quashed new trust initial public offerings (IPOs) for much of the year, and not too far behind the £8.9bn raised in 2019.

Winterflood said the highest total in recent years had been £9.8bn in 2017 but they expect 2021 to ‘surpass this comfortably’.

‘The fundraising pipeline is healthy and it seems probable that more funds will announce issuance plans in the next month or so,’ Elliott added.  

Although there have been some high-profile disappointments, notably the Liontrust ESG Trust failing to get off the ground, the sector has seen eight IPOs so far this year. Two more have announced their intention to float, with Blackfinch Renewable European Income after £300m and Responsible Housing Reit, which will be managed by BMO, seeking £250m to join the expanding social housing sector.  

Over 35% of the total raised so far this year has been in the infrastructure sub-sector, where there is every sign that activity will continue, particularly for green assets.

Aquila European Renewables Income (AERI ) is at least one investment company to have raised more money, winning €90m (£77m) in the past week.

Meanwhile SDCL Energy Efficiency Income (SEIT ), Renewables Infrastructure Group (TRIG ) and busy Digitial Infrastructure 9 (DGI9 ) are also carrying out raises currently.

The latter is seeking £200m in its second share issue since its £300m flotation in March. As is the convention with most investment trusts, DGI9’s placing price of 107.5p represents a premium to the trust’s net asset value but a discount to the share price before the fund raise was announced yesterday.

While generalist property trusts continue to trade at wide discounts to the values of the their portfolios, reflecting a lack of investor demand, specialist property mandates have remained popular.

Target Healthcare Reit (THRL ) has just hauled in £125m after an oversubscribed issue. Aberdeen Standard European Logistics Income (ASLI ) is looking to raise £75m in an intermediaries offer open to all investors, and Home Reit (HOME ), which rents properties to charities and other to alleviate homelessness, hopes to accomodate £262m through a share issue and 12-month placing programme.

A dearth of new equity trust launches, after several failures for UK smaller companies closed-end funds last year, remains a feature. But the broader investment trust universe continues to see ‘healthy’ levels of regular share issuance to the market – as opposed to placings – at premiums to NAV, with much of that going to equity funds. 

The leading issuers so far this year include Smithson (SSON ) on £390m, Edinburgh Worldwide (EWI ) with £131m and Impax Environment Markets (IEM ) at £127m, though the latter is now looking to restrict the number of shares it issues due to valuation concerns in its target markets.

Defensive multi-asset vehicles have also proved popular as investors fret about rising inflation, allowing Capital Gearing (CGT ) to issue £171m of new shares and Personal Assets (PNL ) £147m.

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