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Investment company H1 review: secondary fundraising hits record

9 July 2019

Renewable Energy Infrastructure receives £1.1bn boost from investors.

Existing investment companies raised £4.0bn in H1 2019, the highest level of secondary fundraising ever seen in the first six months of a year. This figure is also the largest amount raised in any previous six-month period, according to new data from the Association of Investment Companies (AIC).1

The record secondary fundraising between January and June was a marked increase from the same period of 2018, when secondary fundraising totalled £2.2bn, and from H1 2017, when £3.4bn was raised by existing investment companies (the previous record for the first six months of a year).

Companies in the Renewable Energy Infrastructure sector led the way raising £1.1bn of the record £4.0bn. This was powered by Greencoat UK Wind which raised £506m, the most by any single company in H1 2019. The second and third sectors were Property – UK Commercial which raised £587m and Infrastructure raising £291m.

The trend of investment company boards negotiating lower fees continued in H1 2019. 20 investment companies reduced management fees for their investors, while two companies abolished their performance fee and three introduced a tiered fee structure. With a tiered fee, charges fall as assets increase enabling investors to benefit from economies of scale. Tables of the investment company fee changes are below.

H1 saw five new investment companies launch raising £739m, led by Schiehallion (£361m) in the Growth Capital sector and US Solar Fund (£153m) in Renewable Energy Infrastructure. IPOs were slightly lower than in H1 2018 when £759m was raised by seven investment companies.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said: “The record level of secondary fundraising, driven by income-generating assets such as renewable energy infrastructure and property shows investor demand for income is still very high. Investment companies are particularly well suited to these types of illiquid assets. The closed-ended structure means investment company managers don’t have to worry about inflows and outflows, allowing them to focus purely on performance. And the fact that investment companies are listed on a stock exchange means investors have liquidity throughout the day.

“It’s good to see the sector is continuing to reduce management fees in 2019. Independent boards of directors are an advantage of the investment company industry and they continue to represent investors’ interests by negotiating lower fees.”

IPOs

Five new investment companies launched in H1 2019 raising £739m.

Month

Company

AIC sector

Management group

Total assets (£m)

Mar

Schiehallion

Growth Capital

Baillie Gifford

361

Apr

US Solar Fund

Renewable Energy Infrastructure

New Energy Solar

153

May

Riverstone Credit Opportunities Income

Debt – Loans & Bonds

Riverstone Investment Group

79

Jun

Aquila European Renewables Income

Renewable Energy Infrastructure

Aquila Capital Investment

137

Jun

Cameron Investors

UK Equity Income

Troy Asset Management

10

Policy changes

There has been a trend for investment companies to increase their exposure to unquoted companies. This continued in H1 2019 with Edinburgh Worldwide and Baillie Gifford Shin Nippon announcing changes to their policies.

Month

Company

AIC sector

Management group

Notes

Jan

Edinburgh Worldwide

Global Smaller Companies

Baillie Gifford

At the AGM held on 23/01/19, shareholders approved plans to change the company's investment policy. Previously, the company's policy was to limit the company's exposure to unlisted equity investments to 5% of the portfolio. The new policy increases this limit to 15% in unlisted equity investments at the time of initial investment.

Jan

Standard Life Private Equity

Private Equity

SL Capital Partners

At the AGM held on 22/01/19, shareholders approved plans to change the company's investment policy. Previously, the company's objective was to achieve long-term total returns through holding a diversified portfolio of private equity funds. The new investment objective broadens this mandate to include direct investments into private companies.

May

Baillie Gifford Shin Nippon

Japanese Smaller Companies

Baillie Gifford

At the AGM held on 17/05/19, shareholders approved an amendment to the company's investment policy. The new investment policy permits investment in unlisted companies at a level of up 10% of the portfolio (at the time of purchase) and increases the maximum number of holdings from 75 to 80.

Fee cuts:

Reduced management fee

20 investment companies reduced the management fee investors pay. Please see the notes to editors for the list of companies and details.

Removed performance fee

Two investment companies removed their performance fee.

Effective

Company

AIC sector

01/01/2019

JPMorgan American

North America

01/01/2019

Henderson EuroTrust

Europe

Introduced tiered fee

Three investment companies introduced a new tiered fee structure.

Effective

Company

AIC sector

New fee(s)

Calculated on

01/01/2019

F&C Investment Trust

Global

0.35% / 0.3% / 0.25%

Market capitalisation

01/01/2019

UK Commercial Property REIT

Property – UK Commercial

0.6% / 0.475%

Gross assets

01/04/2019

3i Infrastructure

Infrastructure

1.4% / 1.3% / 1.2%

Gross assets

-Ends-

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Notes

  1. £4.0bn secondary fundraising is by investment companies excluding VCTs. The second-highest amount raised in a six-month period was £3.6bn between February 2017 and July 2017 inclusive.
  2. 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 360 members and the industry has total assets of approximately £193 billion.
  3. 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.
  4. To stop receiving AIC press releases, please contact the communications team.
  5. The 20 investment companies that reduced the management fee investors pay are listed in the following table.

Effective

Company

AIC sector

New fee(s)

Calculated on

Old fee(s)

Notes

01/01/2019

F&C Investment Trust

Global

0.35% / 0.3% / 0.25%

Market capitalisation

0.37%

 

01/01/2019

Murray International

Global Equity Income

0.5% / 0.425%

Net assets

0.575% / 0.5% / 0.425%

 

01/01/2019

City of London

UK Equity Income

0.325%

Net assets

0.365% / 0.35%

 

01/01/2019

British Smaller Companies VCT

VCT Generalist

1.00%

Net assets

2.00%

 

01/01/2019

Troy Income & Growth

UK Equity Income

0.65%

Net assets

0.75% / 0.65%

 

01/01/2019

Third Point Offshore Investors

Hedge Funds

1.25%

Net assets

2.00%

 

01/01/2019

Aberdeen Standard European Logistics Income

Property – Europe

0.75%

Net assets

0.95 / 0.75%

 

01/01/2019

Murray International

Global Equity Income

0.5% / 0.425%

Net assets

0.575% / 0.425%

 

01/01/2019

Baillie Gifford Japan

Japan

0.75% / 0.65% / 0.55%

Net assets

0.95% / 0.65% / 0.55%

 

01/01/2019

Baillie Gifford Shin Nippon

Japanese Smaller Companies

0.75% / 0.65% / 0.55%

Net assets

0.95% / 0.65% / 0.55%

 

01/01/2019

Edinburgh Worldwide

Global Smaller Companies

0.75% / 0.65% / 0.55%

Net assets

0.95% / 0.65%

 

01/01/2019

Pacific Horizon

Asia Pacific

0.75% / 0.65% / 0.55%

Net assets

0.95% / 0.65% / 0.55%

 

01/01/2019

UK Commercial Property REIT

Property – UK Commercial

0.6% / 0.475%

Gross assets

0.65%

 

01/04/2019

Schroder AsiaPacific

Asia Pacific

0.8% / 0.75%

Net assets

0.9% / 0.8% / 0.75%

 

01/04/2019

JPMorgan Chinese

Country Specialist: Asia Pacific – ex Japan

0.90%

Net assets

0.90%

Changed from gross assets to net assets.

01/04/2019

3i Infrastructure

Infrastructure

1.4% / 1.3% / 1.2%

Gross assets

1.5% / 1.25%

Previously, the applicable annual rate of 1.5% dropped to 1.25% p.a. for investments once they had been held by the group for longer than five years.

01/05/2019

Polar Capital Technology

Technology & Media

1.0% / 0.85% / 0.8% / 0.7%

Net assets

1.0% / 0.85% / 0.8%

New lower tier rate; Max cap reduced from 2% to 1%.

31/05/2019

Fundsmith Emerging Equities

Global Emerging Markets

1.00%

Net assets

1.25%

 

01/06/2019

Aberdeen Japan IT

Japan

0.75%

Lower of net assets or market capitalisation

0.75%

Changed from net assets to whichever is lower out of net assets and market capitalisation.

21/06/2019

Albion Enterprise VCT

VCT Generalist

1.75%

Net assets

2.50%

 

 

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