Gabelli trust may have a tough time, analysts predict

Gabelli trust may have a tough time, analysts predict

Experts have warned that a new US investment trust coming to the UK market may struggle to get off the ground.

Gabelli Asset Management, a US-based investment manager, is raising money for the Gabelli Value Plus+ Trust, a new investment trust that will invest in US equities.

The trust is aiming to raise between £100m and £250m, and its chairman will be Andrew Bell, who is also chairman of the Association of Investment Companies.

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But the asset manager may struggle to hit that target, according to investment trust analysts, who do not think there is demand here for a US equity trust.

Stephen Peters, Charles Stanley’s investment trust analyst, said: “New launches within US equities are very difficult” because “the market is so efficient, so well covered by open-ended funds and [an] exchange-traded fund [ETF] is a very easy and cheap solution for such a difficult market for active managers to outperform in”.

“They will have to work hard to convince investors that buying the US market in a listed fund is better than doing so through open-ended funds or ETFs.”

Gavin Haynes, managing director of Whitechurch Securities, said the group would have to generate a lot of interest from institutions because Gabelli “[does] not have any retail presence in the UK”.

He added that the expected total expense ratio of 1.23 per cent might “be off-putting when comparing against the wide choice of actively managed open-ended US offerings”.

The group will also need to buck a poor record for US equity investment trusts, which have struggled to gain traction in the UK.

In 2012 the F&C Barrow Hanley US trust was pulled after failing to reach £100m and, in the same year, the Black Rock North American Income trust raised just £65m against hopes for £200m.

The BlackRock trust recently had to buy back 20 per cent of its shares. Investors were keen to sell out after the trust had struggled relative to the index since launched, according to Numis.

Gabelli is hoping to do better than its fellow US entrants by offering a particularly active fund that is agnostic to the index.

Macrae Sykes, a research analyst on the Gabelli trust, said: “Most of what is offered [in the UK] uses the S&P [index]. We are independent and agnostic to the index. I think the market will find it refreshing to see such a fund actively investing.”

The trust will invest in roughly 100 stocks, and will have a mid-cap bias, with holdings having an average market value of £20bn-£30bn compared to the S&P 500’s average of around £130bn.

Simon Elliott, head of research at Winterflood, said: “Gabelli is a well-known US manager whose pedigree is reflected by the quality of the board that the prospective investment trust has attracted.

“If Gabelli is successful in raising £250m, it would be the largest IPO for an investment trust investing in equities since 2010, when the Fidelity China Special Situations trust raised £460m.”