“Be fearful when others are greedy and greedy when others are fearful,” said Warren Buffett, who knows a thing or two about investment. It’s a piece of advice that goes a long way towards explaining the spate of special purpose acquisition companies (Spacs) launched in recent months. These “blank cheque” companies list on the stock market, raising considerable sums from investors, but do not start out with a business proposition of their own; rather, the money is used to pounce on opportunities as and when they emerge.
Richard Branson’s Virgin Group is the latest to venture into this market, with a vehicle that is currently seeking to raise $400m in the Cayman Islands; the billionaire plans to invest the money over the next couple of years in what he expects to be an attractive market for picking up the sort of consumer-facing companies he has been running for many years.
Much closer to home, however, there is another option for investors and advisers who buy the theory that difficult market conditions create opportunities, but who want something that feels a little more tangible and trackable. Tellworth British Recovery & Growth is a brand new investment company currently in the process of raising up to £500m. It will invest in UK companies the management team believes are undervalued, and British businesses with a claim to be global leaders or pioneers in their particular field.
Some analysts are describing the new issue as an investment company for Brexiteers, in that it unashamedly takes the view that many British companies will offer real value in the years ahead. But whatever your politics, this is a fund for investors who want to bet on economic recovery, even at this difficult moment of a second wave of Covid-19 and escalating Brexit negotiations.
Clearly, the fund will not be suitable for everyone. Nevertheless, it is good to see the investment company sector dipping its toe back into the new issues market after a very quiet few months. British Recovery & Growth appears to offer something different to the marketplace – and does so through the familiar structure of a London Stock Exchange-listed investment company, which is likely to sit much more comfortably with investors than the Spacs currently raising money in markets around the world. The fund is also aiming for a yield of 5% in its first year, which will catch the eye of income-seeking investors.
In fact, it has been an interesting couple of weeks for those who follow investment company IPOs, with two other new issues providing further evidence of the industry’s ability to accommodate the changing tastes and demands of investors. Both Home REIT and Triple Point Energy Infrastructure will appeal to the growing number of investors who want funds with a tilt towards environmental, social and governance (ESG) factors.
The former will invest in accommodation to be let to charities and housing associations tackling homelessness. The latter will focus on green infrastructure as the UK works towards its targets for carbon emission reductions. Both, in other words, appeal to investors who believe it is possible to do well by doing good. This is a segment of the market that the investment company industry is sometimes accused – albeit somewhat unfairly – of overlooking.
Is now the time to be launching new investment companies? Well, that brings us back to Warren Buffett. The so-called Sage of Omaha is known for buying stakes in businesses and then holding them for super long periods – he is a subscriber to the theory that time in the market beats timing the market. These particular funds may or may not be of interest to investors, but it is encouraging that investment company managers once again feel able to bring forward interesting opportunities for investors prepared to take a long-term view.