A turning point for IPOs?

Maybe there is life in the investment company IPO market yet. It’s been a miserable year for launches of brand-new investment companies, with downbeat investor sentiment limiting people’s appetite to back initial public offerings; a string of issues has had to be abandoned. But as the year comes to a close, two new funds are hoping to buck the trend.
 

Both are specialist initiatives. First, Conviction Life Sciences is looking to raise £100m to invest in life science companies in Europe and beyond; manager Andrew Craig accepts that investors have been wary of such businesses during 2022 but hopes this will have created valuation opportunities in a sector where the long-term outlook looks bright. The second new launch is the AT85 Global Mid-Market Infrastructure Income Trust, looking for £300m to invest in transport, logistics and digital infrastructure assets with the potential to generate both income and capital growth.
 

Both funds are making a strong case for why they are relevant and compelling. But the harsh reality is there can be no certainty that either will attract sufficient interest from investors to get out of the gates. Conviction Life Sciences planned to close its fundraising on 13 December, but has had to extend this to 31 January. Don’t be surprised if one or both of these launches has to be shelved altogether. Investors and advisers alike continue to feel anxious and cautious.
 

Nevertheless, it is encouraging to see that two such different investment teams have sufficient confidence to give an IPO a try in the first place. It might just suggest we are reaching a turning point for market sentiment. Certainly, global markets have stabilised in recent weeks – including the UK, which has actually been one of 2022’s top performers – despite the backdrop of ongoing economic volatility and uncertainty.
 

A more parochial observation is that these launches are yet another reminder of how investment companies so often offer something different. They provide access to specialist investment plays through a liquid structure that gives investors the certainty they need about having access to the money whenever it is required. The role of an investment company is invariably to provide a simple point of access to a complex investment proposition.
 

In that sense, the sector has always been an innovator. From the early days of investment companies launched to finance new railways or the industries of empire, through to the modern day, the funds have always been a democratising force. They’ve given a far wider group of investors access to opportunities typically reserved for the wealthy, or for institutions.
 

It is easy to launch “me too” products in financial services. We’ve seen countless examples of that over the years in an industry where marketing managers have rushed to capitalise on the latest big thing. But invention is important – and much more challenging to deliver. Time and again it is investment companies that have pushed the envelope on behalf of investors.
 

For this reason alone, is to be hoped that both these investment company IPOs get off the ground. Both appear to offer something new – to give investors more options about how they allocate their investments.