Investment company 2020 review

Industry assets hit all-time high.

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While 2020 has been a year like no other, it has been a strong one for investment companies. Industry assets hit an all-time high of £221.4bn at the end of November1 reflecting a healthy recovery from the pandemic lows and the average investment company has returned 10.2% in the year to date (between January 1st and December 11th).2

Investment companies continued to implement fee changes to benefit shareholders this year with 32 making amendments such as lowering management fees, introducing tiered fees and removing performance fees.

Existing investment companies raised £5.7bn in 20203 (secondary fundraising). This is lower than in 2019 when £7.3bn was raised – an all-time record – but higher than the £4.8bn raised by existing investment companies in 2018.

Existing investment companies in the Renewable Energy Infrastructure sector (secondary fundraising) raised the most of any sector in 2020 with £1.3bn. The Renewable Energy Infrastructure sector also raised the most of any sector in 2019 (£1.8bn).  In 2020, Renewable Energy Infrastructure was followed by Property - UK Commercial (£732m) and Global Smaller Companies (£512m). The largest fundraisings by individual existing companies were completed by Hipgnosis Songs Fund (£426m) in the Royalties sector, Greencoat UK Wind in Renewable Energy Infrastructure (£400m) and Smithson (£349m) in Global Smaller Companies.

After a slow start, IPO activity picked up in the second half of the year with five new investment companies launching. This brings the total number of IPOs in 2020 to six, raising £855m.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said: “Despite the disruption and uncertainty caused by COVID-19, 2020 has seen the continuation of long-running themes in the investment company industry: healthy asset growth, strong fundraising from existing companies and falling fees. Investment companies in the Renewable Energy Infrastructure sector continue to be in high demand for their attractive yields and their ability to contribute to a greener future.

“The UK commercial property sector is amongst those that raised the most this year. With most of the major open-ended property funds suspended for the majority of 2020, it’s encouraging to see more investment in closed-ended property investment companies which are particularly suitable for illiquid assets like property.

“Boards have proactively worked on behalf of shareholders in the challenging environment of 2020 by negotiating lower fees for shareholders and proposing management group changes and mergers. An independent board is a crucial advantage of investment companies over other types of fund and it’s good to see them continuing to represent shareholders’ interests.”

Mergers and management group changes

In addition to the merger between Perpetual Income & Growth and Murray Income in November, the following investment companies appointed new management groups in 2020.

Month

Investment company

AIC sector

New management

Jan

LMS Capital

Private Equity

LMS Capital

Mar

Edinburgh Investment Trust

UK Equity Income

Majedie Asset Management

May

Personal Assets

Flexible Investment

Troy Asset Management

May

Strategic Equity Capital

UK Smaller Companies

Gresham House Asset Management

Sep

Baillie Gifford China Growth

Asia Pacific

Baillie Gifford

Oct

Temple Bar

UK Equity Income

RWC Asset Management

Nov

Securities Trust of Scotland

Global Equity Income

Troy Asset Management

Source: AIC.

Fees:

Removed performance fees

Month

Investment company

AIC sector

January

New Star

Flexible Investment

June

European Opportunities

Europe

June

Worsley Investors

UK Smaller Companies

July

BMO Real Estate Investments

Property - UK Commercial

October

Vietnam Holding

Country Specialist: Asia Pacific - ex Japan

October

Lowland

UK Equity Income

Source: AIC.

Introduced tiered fees

Month

Investment company

AIC sector

January

Aberdeen Asian Income

Asian Pacific Income

February

Urban Logistics REIT

Property - UK Commercial

March

Edinburgh Investment

UK Equity Income

April

JPMorgan European

Europe

April

Schroder UK Public Private

Growth Capital

June

European Opportunities

Europe

July

GCP Student Living

Property - UK Residential

September

NB Global Monthly Income

Debt - Loans & Bonds

October

AVI Global

Global

Source: AIC.

IPOs

Month

Investment company

AIC sector

Total assets (£m)

Feb

Nippon Active Value

Japanese Smaller Companies

103

Oct

Home REIT

Property - UK Residential

241

Oct

Triple Point Energy Efficiency Infrastructure

Renewable Energy Infrastructure

100

Nov

Round Hill Music Royalty

Royalties

214

Dec

Schroder British Opportunities

UK Smaller Companies

75

Dec

Downing Renewables & Infrastructure

Renewable Energy Infrastructure

123

Source: AIC/Morningstar.

Fundraising by existing investment companies:

Top fundraising sectors

AIC sector

Secondary fundraising total (£m)

Renewable Energy Infrastructure

1,276

Property - UK Commercial

732

Global Smaller Companies

512

Infrastructure

492

Royalties

426

Source: AIC/Morningstar. Secondary fundraising = fundraising by existing companies (excludes IPOs). Closed issues admitted to trading only. Ex VCTs and shares reissued from treasury.

Top fundraising by existing individual investment companies

Investment company

AIC sector

Secondary fundraising total (£m)

Hipgnosis Songs Fund

Royalties

426

Greencoat UK Wind

Renewable Energy Infrastructure

400

Smithson

Global Smaller Companies

349

Supermarket Income REIT

Property - UK Commercial

340

Sequoia Economic Infrastructure Income

Infrastructure

300

Source: AIC/Morningstar. Closed issues admitted to trading only. Ex VCTs and shares reissued from treasury.

-ENDS-

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Notes to editors

  1. The previous all-time high for investment company industry assets was £209.4bn as at 31 October 2020. Source: AIC/Morningstar.
  2. Share price total return of the weighted average investment company excluding 3i and VCTs. Source: AIC/Morningstar.
  3. £5.7bn secondary fundraising is by existing investment companies from 1 January to 9 December. Closed issues admitted to trading only. Excludes VCTs and shares reissued from treasury. Source: AIC/Morningstar.
  4. Fee data is fee changes implemented from 1 January to 7 December 2020. Source: AIC.
  5. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 356 members and the industry has total assets of approximately £221 billion.
  6. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.
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