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Investment company H1 review

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13 July 2020

The fee cuts continue.

Investment companies have continued to cut fees in the first half of 2020 according to new data from the Association of Investment Companies (AIC). 18 investment companies brought in changes such as lowering management fees, abolishing performance fees and introducing tiered fees.1

Despite the impact of COVID-19, £2.27bn was raised by existing investment companies.2 Whilst lower than H1 2019 which saw a record £4.0bn of secondary fundraising, this was slightly ahead of the same period in 2018 when £2.25bn was raised.

Investment companies in the Renewable Energy Infrastructure sector led the way raising £352m. They were followed by Infrastructure (£317m) and Property - UK Commercial (£290m). The largest individual fundraisings were completed by Sequoia Economic Infrastructure Income in the Infrastructure sector (£300m) and Supermarket Income REIT (£140m) and Urban Logistics REIT (£137m) from Property - UK Commercial.

The first half of the year saw one new investment company launch, Nippon Active Value Fund in the Japanese Smaller Companies sector, raising £103m in February.

At the end of June the average investment company discount was 8%3 and industry assets were £201.7bn, a new all-time high, reflecting the strong recovery from the coronavirus market falls.4

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said: “Despite the challenges of COVID, the first half of 2020 saw the continuation of themes which have been prevalent in recent years. There was further strong fundraising by existing investment companies, particularly those investing in income-generating alternative assets where the investment company structure is so well suited. Investment companies continued to lower charges, with a further 18 changing their fees to benefit shareholders. It’s encouraging to see investment company boards continuing to negotiate lower costs, particularly during the difficult times of the past few months.”

Long-term debt issuance

Month

Investment company

AIC sector

Value

Maturity

Interest rate

Jan

Scottish Mortgage

Global

£188m

20/25/30yrs

2.3%/1.65%/1.77%

Feb

JPMorgan American

North America

$65m

11yrs

2.55%

Source: Numis Securities. Ex investment companies investing in alternative assets.

Fundraising by existing investment companies:

Top fundraising sectors

AIC sector

Secondary fundraising (£m)

Renewable Energy Infrastructure

352

Infrastructure

317

Property - UK Commercial

290

UK Equity Income

211

Global Smaller Companies

183

Source: AIC. Ex VCTs.

Top fundraising investment companies

Investment company

AIC sector

Secondary fundraising (£m)

Sequoia Economic Infrastructure Income

Infrastructure

300

Supermarket Income REIT

Property - UK Commercial

140

Urban Logistics REIT

Property - UK Commercial

137

Renewables Infrastructure Group

Renewable Energy Infrastructure

120

Smithson

Global Smaller Companies

120

Source: AIC. Ex VCTs.

Fees:

Introducing tiered fees

Month effective

Investment company

AIC sector

Jan

Aberdeen Asian Income

Asia Pacific Income

Feb

Urban Logistics REIT

Property - UK Commercial

Mar

Edinburgh Investment Trust

UK Equity Income

Apr

JPMorgan European

Europe

June

European Opportunities

Europe

Source: AIC.

Removing performance fees

Month effective

Investment company

AIC sector

Jan

New Star

Flexible Investment

Jun

European Opportunities

Europe

Source: AIC.

-Ends-

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Notes

  1. Fees data includes fee changes implemented from 1 January to 30 June 2020.
  2. £2.3bn secondary fundraising is by investment companies excluding VCTs.
  3. Average discount is the overall weighted average excluding VCTs at 30 June 2020.
  4. The previous all-time high for investment company industry assets was £201.6bn as at 31 December 2019.
  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. As at the end of June, the AIC had 360 members and the industry had total assets of approximately £202bn.
  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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